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2020 has been a year like no other. In terms of investing, 2020 was likely to be a volatile year given the impending American election and the negotiations surrounding the final withdrawal agreement for Brexit. However, all those factors looked insignificant when compared in relation to the unprecedented times the pandemic created.
Despite the volatility due to the uncertainty that the pandemic produced, there were still some stocks and sectors that did well this year. But what were they? And why? Here, we investigate the winning sectors of 2020 so far.
The Technology sector did exceptionally well during the pandemic. Even when considering the large sell-off of many technology stocks in the early Autumn, companies like Facebook, Netflix and Alphabet, still made eye-watering gains this year. For example, Apple grew to a market cap of $2trn. To help put that into perspective, that is more than the combined market value of FTSE 100.
During 2020, the Consumer Goods sector rose by about 30%. Within the sector, industries such as household goods and leisure goods are included. As a result, companies that sold such items were prime for a large increase in demand thanks to so many people spending increased time in their homes. Demand for gardening items and DIY products soared as people looked to make the most of the lockdown restrictions.
The Consumer Services industry rose in the face of the pandemic. While it does include such industries like travel and leisure which would have had a tough time in 2020, it also includes food and drug retails companies. Supermarket chains in the UK saw huge rises in demand for food and produce while restaurants, bars and cafes were closed. Tesco recently managed to pay out over £300 million to its investors off the back of a hugely profitable year. So much so, it even decided to repay the government £585million. It could do so thanks to the business rate relief initiative the government put in place to help ailing companies.
Identifying sectors that have the potential to do well is a much-used investment technique for good reason. Having identified sectors that could grow due to a favourable environment, investors can then delve deeper and stock pick from companies with excellent fundamentals that are currently undervalued in the eyes of the market.
While no one could have predicted the pandemic and the impact it would subsequently have on companies, industries and sectors, some investors would argue that it has simply quickened the pace of the structural changes in global trends that were inevitably going to happen anyway.
Our usage of online technologies was arguably only ever going to increase as we saw it do during lockdowns. The British High Street is a prime example of how we were all shopping online more - even before the Coronavirus wreaked its havoc. Many companies were already faltering and the pandemic only exacerbated the problem that was already there.
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