2020 was a volatile year for stock markets globally, with the COVID-19 pandemic wreaking havoc among many economies and creating tremendous uncertainty.
The S&P 500, for example, declined by over 30% between February and March 2020. This was the fastest bear market from an all-time high in history.
Its recovery was equally fast.
The Nasdaq composite and S&P 500 erased their year-to-date losses in May and June respectively.
This recovery was driven by big tech companies like Amazon, Apple, Microsoft, Facebook, and Google – which hit all-time highs this year.
It may seem strange that some companies hit all-time highs during a pandemic and economic downturn, but it is not surprising considering the market.
Billionaire investor Bill Ackman explained that the pandemic affects companies differently, and large-cap corporates with strong balance sheets becoming beneficiaries.
Tech giants make up a large percentage of market-cap-weighted indexes like the S&P 500 and Dow Jones, which explains the market recovery while other companies continue to struggle.
There is also a hunt for higher yields with ultra-low interest rates in advanced economies like the United States and Europe.
Equities are an attractive destination for investors looking for growth, which means the markets remained strong despite the financial slump.
South African tech shares
The Johannesburg Stock Exchange (JSE) All Share Index (ALSI) also performed well considering the impact of the pandemic on the South African economy.
The JSE ALSI opened at 57,084 in January 2020 and closed on 59,409 at the end of trading on 31 December.
During 2020, the JSE ALSI hit a low of 37,178 in March and hit a high of 60,592 in December.
The effect of the pandemic on listed South African technology companies varied significantly.
Cartrack, for example, had a stellar year and doubled its share price in 2020. Reunert’s share price, in turn, halved.
There were five South African ICT companies whose share prices increased in 2020 – Cartrack, Blue Label, Naspers, AdaptIT, and Vodacom.
The biggest losers during 2020 were Reunert, Alviva, EOH, MTN, Datatec, Telkom, Mustek, and Mix Telematics.
Here is how much money you would have now if you invested R10,000 in these companies on 2 January 2020.