A Year in Review: The Stock Market in 2021
During the first three months of this year, a change in leadership and progress against COVID-19 were the main themes. Optimism about the economic rebound was growing, we saw laggard value stocks take lead in contrast to more valued stocks, but most of all, energy stocks were booming. Tech stocks, on the other hand, were at the bottom of the rankings. Companies tied to the US economy that operate on a smaller scale turned out to be top performers. Bonds saw inflation concerns emerging and even with the Federal Reserve’s loose policies there were losses in sectors that fluctuated strongly depending on the interest rate.
Some notable events include the 46th president office being claimed by Biden, a 2% yield on 30-year Treasury for the first time since the pandemic, the Dow Jones closing above 33,000 for the first time, and more.
Alas, the Treasury 10-year yield fell to 1.45% and high-yield bonds were ahead of government and corporate ones. Oil demand was on the rise again and prices, along with energy stocks, were at the top of the sector list once again. This time, though, tech stocks were right behind, while industrial and utilities sectors dragged. Growth stocks beat value stocks during this quarter but small value continued to overturn small growth.
June ended and index returns were up, showing positive numbers – 8.24% for the US, 5.65% for international developed stocks, and 5.05% for emerging markets stocks. Global real estate topped the group at 10.17% returns. Notable events during Q2 include the G-7 nations reaching an agreement on new rules for taxing global companies, US inflation reaching a 13-year record high, China’s first digital currency, Japan’s economy announcing a shrinking of annualized 3.9% in Q1, and more.
With the coming of the second half of 2021, we saw an overall neutral state of markets.
Emerging markets stocks suffered the most at 8.09% decline. Despite that, there were many happenings. US oil topped $75 for the first time since 2018, major US stock indices reached new ATH, Nasdaq closed above 15,000 for the first time, US hiring slowed down, Eurozone inflation hit decade high, GameStop and AMC driving big gains, and more.
Q4 and beyond
One of the main drivers during the last months of the year was the omicron variant’s severity that pushed the stock market to overreact and oversell. However, it has been deemed “a bit encouraging”, based on the preliminary data. Oil and common stocks suffered the most, though tech stocks were not affected but even the opposite.
Regardless, on a global level, it appears that the recovery continues and in the coming year, we may be able to see even more positive numbers.