Hindsight is always 20 : 20

4 min read

As an investor, it is crucial to stay informed about global market trends and economic developments. In this blog post, we will dive into the impact of COVID-19 on investments in two major countries, China and India. We will analyse a chart provided by chartist Charlie Bilello, comparing the MSCI ETF for India (blue line) and China (red line) since the last quarter of 2020.

Image Credits : Charlie Bilello

The Influence of COVID-19

The COVID-19 pandemic has undoubtedly had a significant impact on global economies. China, being the first country to face the brunt of the virus, recovered earlier than the rest of the world. This created a unique investment opportunity for global investors seeking potential growth. Let’s transport ourselves back to September/October 2020 when the world was still grappling with COVID-19, experiencing the end of the first wave and anticipating the onset of the second wave.

If you were an investor during that time, knowing that China had already emerged from the worst of the pandemic, you would naturally consider it an attractive investment option. China, as one of the fastest-growing economies and a dominant player in the global market, presented an optimistic outlook for the coming years.

A Tale of Two Markets

Let’s examine the performance of the China and India ETFs from the aforementioned period until now. Surprisingly, the China ETF is down 41%, whereas the India ETF has risen by 33%. These figures are all dollar-denominated. It’s interesting to note the flatness of the highs on the Nifty, which reflects the impact of currency exchange rates on investment returns.

This performance divergence between China and India highlights an essential investment lesson – projections and expectations often do not align with reality. Even the most well-informed projections or growth paths outlined by companies or sectors can deviate significantly from actual outcomes. The example of China’s market fall by 41% and India’s rise by 33% showcases the unpredictability of market behaviour.

Markets and Their Own Paths

The stock market has a knack for surprising investors. Last night, despite geopolitical news that triggered expectations of a collapse, the US market rebounded impressively. This demonstrates that markets often defy the narratives built around them and chart their own paths. As investors, we must navigate through this unpredictability and adapt our strategies accordingly.

As we strive to understand the market dynamics, we tend to rationalise the reasons behind market fluctuations retrospectively. For instance, the current narrative suggests that money is flowing out of China due to various issues, while India is enjoying the benefits of its strong leadership. However, these narratives form after the fact, and it is crucial not to rely solely on hindsight. The ever-changing market ecosystem can surprise even the most seasoned investors.

Bhaav Bhagwan Che

In times of uncertainty, it is essential to follow the principles of risk management and diversification. One way to protect your portfolio from potential disasters is by adhering to sound investment strategies and remaining vigilant. Avoiding deep pitfalls in your portfolio is the key to maintaining steady growth. Emphasising risk assessment and implementing a disciplined approach to investing can shield you from unexpected downturns.

In conclusion, the COVID-19 pandemic has had a profound impact on global investments, especially in countries like China and India. While China, as the first country to recover from the initial impact of the pandemic, seemed like an attractive investment option, its performance since then has been lacklustre. Conversely, India has surprised investors with its positive growth despite numerous challenges.

Remember, market behaviour rarely follows a predictable path. As investors, we must recognize that projections and expectations often do not come to fruition. Instead, it is crucial to stay informed, assess risks carefully, and maintain a disciplined approach to investing. By doing so, you can protect your portfolio and position yourself for long-term success.

If you have any questions, please write to support@weekendinvesting.com

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    Hindsight is always 20 : 20