I am indebted to my friends at 7IM for the following, which I found quite fascinating.
A snapshot of financial markets really can record the most remarkable moments.
Last week was the three-year anniversary of one of the strangest financial market events ever.
On 20th April 2020, the price for of the West Texas Intermediate Crude Oil contract went negative!
Although this market oddity only lasted a day, it was an extremely visible signal of just how strange the world was during the early days of COVID-19 lockdowns – and a great reminder that in times of panic, financial markets don’t behave rationally.
Here’s another incredible oil-related example from the same period.
In mid-2020, Shell and BP were the fifth and eighth biggest oil companies in the world, between them employing 155,000 people, and generating $199 billion in sales.
At the same time, Zoom Video Communications had 2,700 employees, and was going to do around $620 million in sales in 2020.
Now, of course, 2020 was the year of Zoom. It became one of the key tools in our day to day lives – working, socialising, pub quizzing and so on. Even so, it wasn’t more important than ENERGY!
But investors were panicking, thinking that no-one would ever go outside again – bidding up anything virtual, and selling down anything related to the real world.
Which led to this surreal situation in October 2020 (circled), where Zoom was a $160 billion company, while BP and Shell were worth just $150 billion – combined!!
Source: Bloomberg/7IM
Fast forward to today though – away from the COVID-19 claustrophobia and panic – and markets have re-evaluated.
Video calls are still important, but maybe not the ONLY thing in the world.
Oil is back at around $80, BP and Shell are worth more than $300bn and Zoom is worth around $20bn.
Decisions made in one-off scary or stressful moments are often affected by our emotions. What feels sensible at the time, can end up seeming surreal a few months later …
I hope you have found this interesting but, if you have any questions about this piece or any other finance related matter, please do not hesitate to get in touch.
Yours sincerely,
Graham Ponting CFP Chartered MCSI
Managing Partner
