COVID-19 pandemic upends global economy, but markets recover to end up on the year

by Russell Investments, UniSaver’s investment manager and consultant

The COVID-19 pandemic that swept across the globe has shocked economies around the world and resulted in the deepest and sharpest global recession since the Second World War. After lurching in and out of lockdowns of their populations, governments in many countries have been unable to contain the spread of the virus, which has proved to have devastating health and economic consequences. With 100 million identified cases and 2 million deaths at the time of writing, the health emergency continues to spiral out of control in many countries. However, the beginning of 2021 marked the first large-scale vaccination programmes, which will hopefully soon start to slow the spread of the virus and allow economies to begin to function more normally.

The rapid spread of the virus earlier in the year contributed to panic and sharp declines in shares and fixed interest securities during February and early March as investors dramatically retreated from markets. However, even as economies around the world crashed, investment markets recovered strongly as central banks cut interest rates and injected massive liquidity. Simultaneously, governments initiated huge spending programmes to combat the economic impacts of the virus. Remarkably, many companies and sectors of economies have thrived, and some areas of the share markets, most notably the large technology and consumer stocks of the US (Amazon, Netflix and Apple), delivered exceptionally strong returns in 2020.

Continuing the recent trend, both US and New Zealand share markets had very strong years in 2020. These markets represent a large portion of the UniSaver portfolios and contributed positively to member returns. For the year, New Zealand shares (as measured by the S&P/NZ 50 Index including imputation credits) advanced almost 15% while global shares gained almost 12% (as measured by the MSCI All Country World Index – New Zealand dollar hedged). Share markets in Europe, while significantly up on the March lows, are in some cases still down on the year, with the Brexit travails remaining an ongoing concern for investors in UK markets. Likewise, shares in sectors that were hit hardest by the lockdowns, such as travel and entertainment, have suffered tremendously.

Global fixed income delivered returns of more than 5% (as measured by the Bloomberg Barclays Global Aggregate Bond New Zealand dollar hedged) for the year as corporate bond prices recovered from the March lows and government bond prices moved higher. 

2020 was another year in which the benefits of holding globally diversified portfolios were clear given the significant variance in investment returns from different sectors, countries and asset classes from one period to the next. While members should expect some volatility in their portfolios, they can be comforted by the fact that they hold a range of asset classes and do not have all their eggs in one basket. 

How did markets affect UniSaver’s investment options?

After a traumatic year for so many, members that have stayed the course with their investments should feel reasonably pleased with the level of returns. Conservative delivered a return of 4.2% for 2020, while Balanced and Growth delivered 5.5% and 4.3% respectively (returns net of fees and tax at 28%).

There are undoubtedly further significant challenges ahead, but the recovery from the March lows does highlight the detrimental impact that knee-jerk investment decisions can have on long-term performance. As ever, we recommend that members focus on the long term when thinking about their retirement plans, balancing the discomfort of short-term volatility with the prospect of positive returns over the longer term.


The distribution of vaccines is likely to make 2021 a year of global economic recovery. While markets have priced in a fair amount of the good news, more gains seem possible as corporate profits rebound and central banks maintain accommodative monetary policies. With the world in the early post-recession recovery phase of the business cycle, the medium-term outlook for economies and corporate earnings is positive. We believe 2021 will feature an extended period of low-inflation, low-interest-rate growth that favours equities over bonds.

However, there are some significant near-term risks. Investor sentiment may have become overly optimistic following recent vaccine announcements. This makes markets more vulnerable to negative news, which could include further lockdowns in Europe and North America as virus cases there escalate, logistical difficulties in distributing the vaccine and slower than expected economic growth in early 2021 (should government support measures be unwound too quickly). Regarding US policy agenda, Democrats seized a Senate majority following the recent run-off election in the state of Georgia, which will make it easier for new President Joe Biden to push through his policy agenda, including tax reform, healthcare changes and energy investment.


The information contained in this publication was prepared by Russell Investment Group Limited (RIG). RIG is the investment manager for UniSaver. This publication has been compiled from sources considered to be reliable but is not guaranteed. This publication provides general information only and should not be relied upon in making an investment decision. Before making an investment decision, you need to consider whether this information is appropriate to your objectives, financial situation and needs. All investments are subject to risks. Past performance is not a reliable indicator of future performance.

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