The 2020 Terms of the Year
2020 brought us a global pandemic, the fastest bull and bear markets on record, a flood of new investors and companies into the capital markets, and a spike in searches for some new and legacy financial terms.
Each year at Investopedia, we look back at the most popular financial terms that captured our readers’ attention throughout the year. With more than 22 million monthly readers and over 30,000 articles on our site, we can view a precise picture of the topics and terms that mattered most in 2020. Our data science team identified which topics had the most notable influx of visitors over the past 12 months, and broke down their interest month-by-month in the following chart.
1. Stimulus Check
The concept of a stimulus check is not new, but it did take on a new life as COVID-19 swept across the world, crippling economic growth. In response to this crisis, governments and central banks worldwide enacted sweeping and sizable fiscal and monetary stimulus measures to counteract the disruption caused by the virus.
In the U.S., the stimulus payments were part of the CARES Act, a larger federal stimulus package designed to support the economy. Congress passed trillions of dollars in fiscal programs, while the Federal Reserve added trillions of dollars in monetary stimulus. On July 28, 2020, the Federal Reserve extended the duration of its lending programs that would have ended on Sept. 30 so that they are now set to end on Dec. 31, 2020.
2. Stock Split
We can thank Apple and Tesla for the surge in interest to this term. Apple enacted a 4-for-1 stock split on Aug. 28, while Tesla enacted a 5-for-1 stock split on Aug. 31. Companies sometimes choose to split their shares so they can lower the trading price of their stock to a range deemed comfortable by most investors and increase the liquidity of the shares. Since the split,Tesla has been welcomed to join the S&P 500 Index and saw its share price jump 43%.
3. Marxism
Karl Marx’s political philosophy is a return visitor to our top terms list, and that should come as no surprise given the contentious political climate here in the U.S. and in Europe. Interest in Marxism took off in late June, coinciding with political upheaval as cities across the U.S. protested police brutality.1
4. Forbearance
Forbearance, or the temporary postponement of mortgage payments, has unfortunately become a popular term as folks struggle to make payments due to the financial burden caused by the pandemic. The housing market saw a K-shaped recovery as higher-income earners purchased new homes, while lower-income earners weren’t sure if they could pay next month’s rent or mortgage. More than 2.3 million homeowners had delinquent mortgages that remain 90 or more days past due, but not in foreclosure, according to Black Knight, Inc. That’s five times the number seen the year prior. Moreover, 4 million homeowners have refinanced their mortgages in 2020 through the third quarter, with refinance origination volumes topping $2 trillion.2
5. Severance Pay
This was also unfortunately very popular in the first few months of the pandemic as 23 million Americans lost their jobs. Severance pay was a lifeline for many of those people and their households until pandemic unemployment insurance was included as part of the CARES Act.
6. Margin Call
Those two terrifying words were echoing the crashes of 2009 and 1999 as the pandemic was in its early days and stock markets plunged into the fastest bear market in history. A margin call is usually an indicator that one or more of the securities held in an investor’s margin account has decreased in value. When a margin call occurs, the investor must choose to either deposit more money in the account or sell some of the assets held in the account. Many unfortunate investors were likely forced to pay up to satisfy their margin debt as stocks plunged in March.
Notably, margin debt was climbing prior to the pandemic as the stock market was coming off a strong 2019. It plunged as the pandemic set in and is climbing sky-high yet again.
7. Black Swan
Some have considered the coronavirus pandemic to be a black swan, a term coined to refer to unpredictable events that are beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, severe impact, and the widespread insistence that they were obvious in hindsight. However, Nassim Nicholas Taleb—the man who popularized the term—said the pandemic isn’t a true black swan because it was wholly predictable.3 Moreover, it is not an outlier when compared to historical pandemics.4
8. Special Purpose Acquisition Company (SPAC)
2020 really has been the year of the SPAC. These blank-check companies have been busy in the cannabis, green technology, and sports-betting arenas in 2020, scooping up companies like DraftKings and Nikola. The common theme there is high-growth potential, big losses, and buzzy trends.
SPACs have raised a record $20 billion in 2020 — a fivefold increase from last year’s record high that was itself up 44% from 2018. According to Goldman Sachs, the 206 SPAC IPOs completed this year account for 52% of the record $124 billion of total U.S. IPO capital raised year-to-date across 356 transactions.
9. Cboe Volatility Index (VIX)
It’s no surprise that this term made the top 10 list given how volatile the markets have been since the start of the pandemic. The VIX is a real-time market index that represents the market’s expectation of 30-day forward-looking volatility. Derived from the price inputs of S&P 500 index options, it provides a measure of market risk and investor sentiments. It is also known by other names like the “Fear Gauge” or “Fear Index.”
We saw a massive spike in the VIX in March as markets tumbled and fears of the intensifying pandemic and its dire human and economic consequences reached a boiling point. In late March, markets began a historic rebound and recovery that brought the VIX back down—but not down to pre-pandemic levels. In June, we saw another spike (though much lower than in March), and again around election time.
10. Socialism
Socialism, Marxism’s close cousin, is always a popular term on our website, but it has gotten a workout in 2020 due to the race for the White House. It surged when Bernie Sanders was a viable candidate and it surged again as President Trump accused Vice President Biden of pushing a socialist agenda during the presidential debates. As polls widened leading up to the election, interest in this term spiked—especially through Election Day.
Socialism has become a hotly debated topic in politics as lawmakers around the world consider whether the “capitalism experiment” has worked. Democratic politicians in the U.S. have espoused themes like Universal Basic Income, Medicare for All, and the elimination of student loans. Conservative opponents may brand these ideas as socialist, but Marx likely didn’t have these topics in mind when he wrote Das Kapital in 1867, his seminal treatise on the underpinnings of the capitalist system and the risks it brings with it.
Honorable Mention: Roth IRA
The economic turmoil resulting from the coronavirus pandemic has given people a reason to think about retirement savings and rainy day funds. Roth IRAs are individual retirement accounts (IRA) that allow qualified withdrawals on a tax-free basis provided certain conditions are satisfied. In 2020, more than a quarter of workers have taken or plan to take a loan or withdrawal from their retirement accounts because of the pandemic, according to a survey from the Transamerica Center for Retirement Studies. Furthermore, as many people lost their income or a significant part of it, they may have chosen to convert their existing IRA account to a Roth IRA to maximize their tax advantages.
