2020 – What a year! And 2021?


2020 will soon be history. When we look back on 2020 in future years, it will be interesting to see how the political and economic decisions that governments and central banks took in 2020 will be judged. Such a review may not be that favourable in hindsight.

Year of COVID-19

At the beginning of 2020 hardly anyone (except perhaps a handful of virologists) expected that the virus from Wuhan would eventually have such an impact on the global economy, yet it did.

As COVID-19 spread through Europe, more and more countries went into lockdown; in the second quarter, the EU was basically closed, as governments battled the virus.

Although we did manage to have a relatively normal summer, the widely anticipated second wave of the pandemic hit Europe severely in the autumn, giving rise to further lockdowns that are still in place in many countries.

Fortunately, a few pharmaceutical companies have developed vaccines against COVID-19, and 2021 will see the launch of many vaccination programs. Hopefully, this will be effective enough to end the lockdowns and enable the return of relative “normality”.

US presidential election

As if the impact of COVID-19 were not enough, the most bizarre presidential election took place in the US. Although governments, central banks and investors had enough to deal with because of the social and economic fallout from the pandemic, President Trump felt an urgent need to again be the centre of attention despite clearly losing the election.

However, on 8 December the individual states completed their vote certification, to be followed by the Electoral College casting its vote on 14 December, so that the Biden administration can begin its path towards assuming power in January next year.

Government and central banks – what now?

In the first quarter of 2020, governments and central banks, especially in Europe, went ”all-in” to save their economies, throwing in everything but the kitchen sink in terms of monetary-policy weaponry to do so.

But one question remains: What now?

As we wrote in our previous newsletter, GDP in the EU at the end of this year will likely be 7-10% lower than that for 2019, and governments have spent an enormous amount of money supporting the economy just to get to this level.

Going into 2021, investors should therefore consider the following questions:

  • What happens if or when governments can no longer support businesses and subsidise employees’ salaries under the various furlough schemes that have implemented?
  • Can the ECB and other central banks continue to buy endless amounts of public debt?
  • If either (or both) of the above-mentioned ends, what will the impact be on the bond and equity markets?

2020 vs 2021

Uncertainty and volatility were at the forefront in 2020 and, as seen from Figure 1, 2020 has been a challenging year for investors.

Figure 1: 2020 Year-to-end-November accumulated returns

Economic uncertainty will continue in 2021, and there is a good chance that European GDP will not have recovered by the end of next year. But how will governments and central banks react to what some observers describe as the “new normal” economic situation?

We believe that both governments and central banks now are in uncharted waters, and that nobody can predict the outcome with any certainty. Consequently, we believe that investors are in for another challenging year in 2021.

Alternative lending in 2021

As with any other asset class, alternative lending has experienced a volatile 2020. Loan volumes have retreated to the levels of somewhere between 12 and 18 months ago, suggesting that a number of loan originators and platforms are having problems.

As a result, consolidation in the sector is now taking place. Smaller players are either closing or being subsumed into the larger and more successful operators. While arguably an inevitable longer-term trend, COVID-19 has probably accelerated this development by a few years.

However, we suspect that the consolidation in alternative lending in the EU has now ended, and we expect volumes to rise again in 2021. The underlying trend of banks exiting the segment of consumer and SME lending has not been interrupted by COVID-19; on the contrary, it is more likely that the pandemic has accelerated this trend.

Quantrom P2P Lending in 2021

While our return has been acceptable in 2020, Quantrom P2P Lending has, of course, not been able to avoid taking some provisions during the year.

Related to the two loan originators on which we have taken provision, there are now agreements in place regarding when they will start to repay the amounts outstanding, which is positive news. The current expectation is that repayments will begin in the first quarter of 2021.

Quantrom P2P Lending has a diversified portfolio of loans with good average interest rates in countries that look like they will be among the least affected by COVID-19.

While we know that next year will be challenging in many ways, we look forward to 2021 with confidence.

Finally, we at Quantrom would like to wish you and your loved ones a very Merry Christmas and a healthy and prosperous New Year.

Be safe.



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About the Author

Gustav Jensen

Gustav is the managing director of Quantrom Limited and is living in near Brussels.

Economist from University of Copenhagen mainly working in finance and banking.