2021 is a very strong year for the US in terms of market returns. The returns were especially impressive coming on the heels of two strong years in 2019 and 2020 and amidst a raging pandemic. The Nasdaq was up a little over 23% for the year so far while the S&P 500 went up over 27%. However, it was not all smooth running for the markets during 2021. There were quite a few eventful weeks during the year when the markets witnessed bouts of volatility. The primary concerns were the on and off threats posed by Covid19 and its myriad variants, and the Fed’s impending actions. There were a few other interesting facets as well. Let’s look at some of the interesting things we witnessed in the markets during the year.
Meme stocks hogged the limelight. So-called due to the memes made on social media platforms, these stocks defied rationality and produced astonishing returns. The two biggest names were AMC and GameStop, each soaring multiple times during the year. These were a part of a bevy of stocks that caught the fancy of the communities in Twitter, Redditt, and other social media outlets. AMC and GameStop began the year as small-cap stocks with businesses that were facing a lot of headwinds. However, by the time their rally ended, both reached multibillion-dollar market caps. Though both corrected towards the latter half of the year, the total returns for the year were mind-boggling as seen in the chart below. Other meme stocks at various times during the year included Bed Bath & Beyond, Blackberry, Clover Health, and Nokia.
Chinese stocks listed in the US include some of the largest companies in the region and were also hot favorites of Tech investors. Didi, the on-demand taxi services company, made its debut in the US with a blockbuster IPO, raising over $4 billion and commanding a valuation of over $70 billion. The IPO was underwritten and managed by some of the top American banks. However, what happened after the IPO sent shockwaves into the entire China investment crowd. The Chinese government first called for a halt to Didi’s signing new customers, then accused the firm of serious violation of data security laws. Within the next few hours, Didi’s stock crashed. These actions were followed by an order to delist Didi from US exchanges. The fear soon spread to other popular ADRs like Alibaba, Baidu, Tencent, JD, etc. The Chinese stocks listed in the US ended the year as one of the worst performers. While one school of thought believes this is the beginning of the end of the market for Chinese securities listing in the US, the second school believes this to be a valuable opportunity to pile into some of the names. Here is the chart of a few of the top Chinese names for 2021.
The FAANG stocks have a large following across the world and are held widely in the most diversified portfolios. These stocks continued to perform impressively during the year. Some of them achieved significant milestones as well. Apple is approaching an astounding $3 trillion in market cap, while Tesla surpassed a trillion in market cap. At the same time, Apple’s revenues continue to grow at a healthy pace. Nvidia continues to reach new highs and is becoming the most important player in the semiconductor market. Microsoft continues to dominate the cloud. Amazon wasn’t too far behind, with its dominance in the e-commerce space and cloud computing. Facebook faced a congressional inquiry but came out without too much damage. The firm also rebranded itself Meta and plans to take the lead into the next generation of the internet. Google parent Alphabet, Netflix, and Salesforce were also some of the better-performing stocks for the year.
Old school stocks also had their fifteen minutes of fame during the year. With the new age technology stocks dominating the headlines, the rally in energy stocks reminded us that the Mr market is ultimately a supply-demand engine. Led by coal and oil shortage, supply constraints, OPEC whims, and overall lukewarm investment in new prospects, the sudden demand spike saw energy stocks soar. Both WTI and Brent prices hit levels not seen after 2014. Below we see some energy ETF returns for the year.
The Fed signed off the year with their announced tapering of asset purchases and paving the road for an eventual rate hike. Inflation was also playing on the minds of the decision-makers. The tapering announcement set off a mini sell-off in the markets reminiscent of a similar phase in 2013. However, the market recovered. The pace of tapering is set to vary as the Fed evaluates the macro environment and monitors factors such as unemployment numbers, wage growth, inflation, and housing numbers. Below we have a snapshot of the US markets (S&P 500 and Nasdaq Composite) during the brief window of a few weeks when the tapering news flowed in.
The market performance in 2021 proved again that timing markets is an exercise in vanity. The market can defy logic in certain areas and follow all rules in others. However, from wealth creation and long-term investment perspective, staying invested is the key. The Globalise platform offers a variety of choices to pursue your international investment journey, from common stocks, ETFs, to curated portfolios – ‘Globes’.
In the current scenario, one question on the minds of both investors and speculators is that are there more opportunities in the commodity space, or is it too late already?
The Russian invasion of Ukraine is the most aggressive military action to happen in the European region since World War 2. From the perspective of the capital markets too, this has been a dramatic event.
Public utilities are an absolute necessity and have predictable cash flows. In this article, we discuss the investment landscape and the key players within the utility sector.