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  • Writer's pictureDaniel Lee

2020 Annual Review. 2021 Market Expectations

Updated: Jun 15, 2023

2020 was indeed a roller coaster ride.

In the first half of 2020, we’ve experienced a large decline followed by a rapid recovery in the second half of 2020.

2020 Performance Review

Overall, the year ended with double-digit performance across the equity funds that we’re currently invested in. On the other hand, the High Yield Asian bond fund posted a disappointing result while the Money Market Fund behaved as per what it was expected to behave.

The annualized returns (bid to bid) of our funds are as follow:

What moved the markets in 2020?

In 2020, I realized that what drives the financial market can be attributed to three key factors:

  • Market Euphoria & FOMO

  • Low-interest rate and lack of savings alternatives

  • Upper and middle class are not that badly affected by the pandemic yet

Market Euphoria and FOMO:

Thanks to COVID-19 and the US Elections, the financial market had received plenty of attention in 2020. In such a state where many of us are focused on the market developments, having a 30% crash followed by a 70% rally in a short span of 12 months only made things worse as it reinforces questionable market beliefs such as: “The market will only go up” or “every dip is a buying opportunity”.

Because of that, a positive feedback loop has been formed. The attention on the markets turned to demand towards the markets which end up driving prices further up. Every increment in prices further reinforces the beliefs that investors had towards the market which motivates them to invest even more (especially with each dip or correction that comes along the way).

Valuations had become a “thing of the past” as investors hold on to marketable investment themes such as “vaccine recovery” and “the light at the end of the tunnel”. Whether or not the move is sustainable is indeed questionable but as of now, the game of musical chair continues.

Low-interest rate and lack of savings alternatives:

In addition to market euphoria, the current interest rate is so low that its incentives savers (you and me) to look elsewhere to earn a higher return on our savings. This further drives up the demand for investments as there is a lack of alternatives for savers to earn a higher return on our savings.

Upper & Middle Class are not badly affected by the pandemic yet

My hypothesis for this point is based on my observations over the year. I realized that when it comes to the impact of the pandemic, many of the upper and middle class are not that badly affected by it yet as the government had absorbed the bulk of the economic damage caused by the pandemic.

As far as the market participants are concerned, the bulk of the players are formed by the upper and middle class who is not that affected by the pandemic yet. As a result, many of these players still have the capacity and resource to remain invested and invest more in the market which is what continued to propel the prices in 2020.

My thoughts on 2021

The keyword is safety.

The question that guides my investment decision is and will always be: “is it safe to invest right now?” If it is, I will remain invested or increase my position. If it is not, I will either exit the market or reduce my position. Its all about managing your risk so that you will not be that badly exposed or affected by unsustainable market development. Manage your downside and the upside will take care of itself (provided you invest in the correct things).

Recovery? What recovery?

The key theme that has been driving market demand and prices is the “Economic Recovery Story” and it goes like this: It is a good time to invest in the market now because the economy is recovering from the pandemic and would come out stronger than ever.

The problem that I have with this belief is that while the economy is indeed recovering back to its previous level, the market prices had already recovered back to where it once was before the February sell down. In fact, in 2020 alone, the market had generated a double-digit return rate while the earnings have yet to recover back to the pre-COVID levels.

Hence, logically speaking, if we were to truly abide by the recovery story, prices should not increase any further as the earnings would need to play the “catch up” game for things to go back to where it once was before lockdown.

However, the bull market is still intact, and the market is still going up. What investors are doing today – consciously or unconsciously – is that they are betting on the future growth rate BEYOND the recovered economic state instead of the economic recovery itself.

They are putting a very high price tag on the future growth rate which may or may not materialize. As far as history is concerned, such a development is often very fragile and all it takes is a single piece of bad news or missed expectations to reverse the entire trend itself

Follow the direction of the crowd but maintain your sanity

As the saying goes, the nails that stick out gets hammered down. In times of market euphoria, we should not be the nail that sticks out but at the same time, we should not be a greedy pig as well.

When it is evident that the market is getting greedy, it may not be entirely wise to stay out of the markets and miss the potential returns driven by the euphoria. However, you need to exert proper self-discipline, look at the facts as it is and not how you perceive it to be, and manage your investment positions carefully.

The entire premise behind getting involved in a euphoric market can only work if you,

  1. buy the right underlying investments that grow

  2. have a long-term horizon and can sit out any mistakes made concerning market timing

  3. maintain your sanity and manage your risks properly

  4. have a high level of self-awareness and a good understanding of market psychology

For my clients, what is our next move?

There are no changes in our long-term strategy, my view towards Asia Region is the same as it was 4 years ago. Sure, there may be hiccups here and there in the next few years but given our investment horizon, such ups and downs are negligible when viewed through the long-term lenses.

I will, however, be monitoring the developments in the technical and fundamentals of our investments very closely in 2021 and depending on the circumstances, lower our risk exposure as and when necessary.

If there is any question you may have for me with regards our strategy or how the current market may relate to your financial planning, you can always PM me or call me and I’ll help you make sense of the market developments!

Cheers and have a good year ahead! See you in our next annual review 😊

For readers

Join the telegram channel and engage me thanks haha.

In the next week, I’ll be shedding some light on the valuations for both MSCI World Index and MSCI AC Asia ex-Japan as well as my commentary on the past performances. So join my telegram channel: “updates from daniel” to stay updated!

If you’re looking to work with an Independent Financial Advisor Representative to tailor an implementable plan for your marriage, children's education or retirement, you can reach me here!

Daniel is a Licensed Independent Financial Consultant with MAS and a certified Associate Wealth Planner that provides advice in the following areas:

  • for investment and portfolio management advice - find out more here

  • for insurance planning and portfolio optimization advice – find out more here

  • for retirement planning advice– find out more here



  • This article is written specifically for my clients but shared to the general public for everybody’s benefit.

  • All information presented is extracted from the Bloomberg terminal on 6 January 2021 and compiled by me.

  • This article is meant to be the opinion of the author and is for information purposes only.

  • This article should not be seen as financial advice

  • This advertisement has not been reviewed by the Monetary Authority of Singapore

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