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Will Scottish Mortgage Trust shares climb higher in 2020?

Scottish Mortgage Trust has generated major returns this year since the coronavirus outbreak in mid-March, with Amazon, Tesla, Netflix and Spotify underpinning its portfolio's performance. But will the bullish trend continue?

  • Scottish Mortgage Trust shares up 120% since mid-March lows
  • The tech trust’s success is underpinned by investment in Tesla, Amazon, Netflix and Spotify
  • Scottish Mortgage Trust boasts wider bullish trend, though short-term weakness likely

Scottish Mortgage Investment Trust (SMT) has generated significant returns this year since the coronavirus outbreak in mid-March, with investments in Amazon, Tesla, Netflix and Spotify underpinning its performance.

All four of these major US stocks are among the top 10 largest holdings on SMT’s portfolio and all of them have performed exceptionally well despite the economic impact of Covid-19 on the global economy.

On a year-to-date basis, Amazon shares are up 65%, while Netflix and Spotify are is 46% and 81% higher respectively. But it was the electric car maker that has delivered the strongest performance in 2020, with Tesla soaring 375% since 1 January.

As a consequence, since hitting a mid-March low 468p per share, SMT has seen its share price climb 120% to trade at £10.28 per share at the time of publication, with the stock up 77% year-to-date.

SMT’s future performance will ultimately be determined by the ongoing success of these big four US tech companies and with the technology sector remaining relatively resilient amid the backdrop of Covid-19 the trust looks set for further success over the long-term.

Scottish Mortgage Trust: technical analysis

Scottish Mortgage Trust has enjoyed a bumper year irrespective of the pandemic, with price having doubled since the March lows. The pullback we have seen over the past week could mark the beginning of a period of weakness, yet it worthwhile noting this wider bullish trend, according to Josh Mahony, senior market analyst at IG.

‘We have seen period of downside over the course of this uptrend, but each has resolved in an ultimate move higher,’ he said. ‘The decline in the stochastic highlights weakening momentum, which may point towards further short-term weakness.’

However, with that wider view in mind, the current weakness could provide an ultimate buying opportunity.

Scottish Mortgage Trust has enjoyed a bumper year irrespective of the pandemic, with price having doubled since the March lows. The pullback we have seen over the past week could mark the beginning of a period of weakness, yet it worthwhile noting this wider bullish trend, according to Josh Mahony, senior market analyst at IG.

‘We have seen period of downside over the course of this uptrend, but each has resolved in an ultimate move higher,’ he said. ‘The decline in the stochastic highlights weakening momentum, which may point towards further short-term weakness.’

However, with that wider view in mind, the current weakness could provide an ultimate buying opportunity.

The breakdown we are currently seeing has provided us with a fresh lower low and lower high. That signals a higher likeliness of downside to come from here, Mahony added.

‘Nevertheless, with a wider bullish view in play, the weakness we could see in the near-term will be viewed in the prism of a market which is temporarily retracing before we push higher once again,’ he said. ‘A break through the most recent swing high (currently £10.83) would bring that bullish trend back into play.’

How to trade stocks with IG

Looking to trade Scottish Mortgage Investment Trust and other stocks? Open a live or demo account with IG and buy (long) or sell (short) shares using derivatives like CFDs and spread bets in a few easy steps:

  1. Create an IG trading account or log in to your existing account
  2. Enter ‘Scottish Mortgage Investment Trust PLC’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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