A turbulent year in the markets is coming to an end after rewarding investors who have embraced risk despite concerns over new variants of the coronavirus and changes in monetary policy.
The S&P 500 Index ended the last trading day of 2021 with a decline of 0.3%, which left the benchmark stock index 27% higher for the year and with no less than 70 record closes .
Cryptocurrencies and commodities also generated substantial returns during the 12 month period in which the world recovered from a global recession. But many investors holding government bonds are taking losses after soaring inflation that led the Federal Reserve and other central banks to cut stimulus and move towards rate hikes. interest.
The retreat from the wave of political support could slow the pace of the recovery and this is one reason investors are questioning whether corporate earnings will continue to support equities in 2022. The ebb in liquidity could also threaten the most speculative corners of the markets, like meme stocks, special stocks. end-purpose acquisition companies – or SPAC – and Bitcoin.
For Peter Berezin, chief global strategist at BCA Research Inc., 2022 will be the âlast hurrayâ for the stock market.
“Global growth will remain well above trend as pandemic fears subside, while inflation will subside as supply chain bottlenecks ease,” he said. declared. It will be some time before monetary policy becomes restrictive, and laggards like value stocks and non-US stock markets are expected to push stocks higher, he added.
Here’s a look at how a notional $ 10,000 investment in a range of assets will perform in 2021:
Among the 500 largest companies by market value, shares of electric vehicle maker Lucid Group Inc. lead the pack, turning $ 10,000 into nearly $ 40,000. Covid-19 vaccine maker BioNTech SE was another big winner, but 2020 pandemic frontrunner Zoom Video Communications Inc. reportedly lost you over $ 4,000 as the world emerged from lockdowns.
One of the most phenomenal developments in the markets in 2021 has been the new power of retail traders, who have organized en masse in online chat rooms and rocked hedge funds by triggering short cuts in businesses. hitherto unknown. The memes stock revolution kids, AMC Entertainment Holdings Inc. and GameStop Corp., soared more than 1,260% and 720% respectively.
What didn’t work
A handful of trades did not perform in 2021 as many had hoped. Star fund manager Cathie Wood’s flagship Ark Innovation exchange-traded fund (symbol ARKK) – one of the big winners in 2020 with a nearly 150% jump – has lost more than 20% this year. It showed how investors rethought valuations of unprofitable tech companies amid rising Treasury yields.
On the other end of the spectrum, a range of reopening games struggled: for example, a notional $ 10,000 invested in the US ETF Global Jets (ticker JETS) would have lost around $ 600. Some strategists argue that 2022 is the date when the reopening really takes shape as the pandemic finally recedes.
China’s stock and credit markets have had a difficult year, penalized by Beijing’s regulatory restrictions in all sectors, including technology and real estate, which have deepened the economic downturn. Some strategists expect China to ease policy and add stimulus, triggering a market rebound. But for now, $ 10,000 invested in shares of developer giant China Evergrande Group has been nearly wiped out, while shares of tech giant Alibaba Group Holding Ltd. would have roughly halved your money.
It has been another crazy year for crypto, with the sector’s market value at one point approaching $ 3 trillion. Bitcoin’s share of the digital asset universe has shrunk, in part because Ether has outperformed the world’s largest token. Some argue that Ether’s popularity for applications such as decentralized finance and non-fungible tokens – digital collectibles – deserves investor interest. A $ 10,000 investment in Ether would have reached over $ 50,000, compared to around $ 16,500 for Bitcoin.
Raw material cycle
A commodity range had a strong year, attracting investors looking to hedge their portfolios against inflationary pressures. The Bloomberg Commodity Spot Index hit an all-time high in October. While a number of raw materials can be distinguished for their performance, one of the eye-catching elements comes from base metals, where tin – which normally doesn’t get much attention – has nearly doubled.