Monday 04 January 2021 4:11 pm  |  Updated:  Monday 04 January 2021 4:27 pm

Volatility was the name of the game in 2020: What were the most popular sectors, funds and shares?

By: Michiel Willems

Volatility was the name of the game in 2020 as the pandemic wreaked havoc across the globe. The spread of Covid-19 was a shock to the financial system, stock markets plunged and companies battened up the hatches.

Despite the vaccine breakthroughs markets are still deep in a tunnel of uncertainty about when the global economy will truly bounce back with spikes in infection rates causing fresh lockdowns across the UK and abroad.

“Because of this there is still divergence between the performance of different sectors, with tech still up near heady heights and looking expensive but energy, hospitality and travel stocks still well down on pre-pandemic levels,” Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, told Morning Wire

Acceleration of digital

The behavioural changes Covid-19 has brought about are only an acceleration of digital trends already sweeping through the economy. This has added to optimism that tech stocks which have already seen big gains will still be a safer longer term bet and the huge appetite for Airbnb shares on floatation underlined that enthusiasm.

“However, the spectre of regulation is now rising over the tech sector. European politicians will soon vote on stringent new rules to limit anti-competitive behaviour and the content on tech platforms,” said Streeter.

Moreover, in the US, Facebook faces legal action accusing it of stifling competition which could see it forced to sell off Whats App and Instagram. Joe Biden has not yet taken office, but already Democratic lawmakers are chomping at the bit to limit the power of other tech companies.

“Legislation will take time to be enacted, but the winds of change are blowing in the direction of a much tougher regulation, which is likely to put pressure on valuations down the line,” Streeter noted.

For now though investor confidence is riding high, registering the highest score since January. Confidence across all sectors has risen this month with Europe and UK scores rising the most.

“The vaccine trial results clearly gave investors a big dose of optimism that recovery will be sustained,” Streeter said.

Best and worst performing sectors

The oil and gas sector was the worst performer in the British stock market in 2020, falling by more than a third.

“The big dent in global growth and demand for oil has been a major factor but energy companies also face a long-term challenge to pivot to renewable energy with many institutional investors under pressure to decarbonise their portfolios,” Streeter explained.

Travel and leisure stocks fell by a fifth as hotels were forced to close during lockdowns and aircraft grounded as demand for international travel plummeted.

“With the success of vaccine trials and roll outs underway, the sectors have made up some ground, but there is still a long way to go, especially given this latest round of lockdowns,” Streeter added.

Most popular funds

In 2020, investors typically looked overseas and to the US in particular for equity exposure, and for funds with a tech leaning. 

“There was a particular interest in Baillie Gifford American which has delivered an exceptional performance mainly due to its investments in the consumer discretionary and technology sectors,” Streeter noted.

Although the fund did have a very strong year, she did point out this is a short timeframe, “so you should consider this performance in the context of a longer time horizon and not in isolation.’’

Most popular funds in 2020

Most popular shares among DIY investors

While retail investors piled into shares last year, many saw some of the sharpest declines during the pandemic.

“There is clearly hope of better times to come for companies like IAG and Carnival, which have seen their share prices recover but are still suffering from sharp downturn in the global travel industry,” Streeter said.

Lloyds Banking group, which galloped back into profitability in the Autumn, was also a firm favourite among retail investors.

There was attraction too for Unilever. “Given its stable of cleaning goods with household names, with expectation that sales will hold up given the nation’s hygiene obsession, even with an uncertain economic outlook,” Streeter concluded.

Most popular 2020 shares among retail investors