Wall Street delivered another strong year for investors in 2021, as the reopening of the global economy fueled a resurgence in consumer demand and pumped up corporate profits. As of December 24th, the S&P 500 had risen 27.7%, its third-straight annual increase. The tech-heavy “Nasdaq Composite” index is up by 23.27% year to date, and Dow Jones Industrial Average has gained 18.95% during 2021.
The top 3 S&P 500 sectors that gained the most during the year were:
- Energy sector - up 46.21% (ETF: XLE)
- Real estate sector - up 37.42% (ETF: XLRE)
- Information technology sector - up 32.73% (ETF: XLK)
Topics that moved the markets in 2021:
- Inflation: Inflation awoke from a long slumber in 2021. The U.S. government's consumer price index skyrocketed 6.8% in the 12 months - the sharpest jump since 1982. Wholesale prices rose even more. Many companies had to raise prices to offset higher input costs and keep profit margins steady. It's unclear exactly when the global supply chain problems will be resolved, so further price increases might continue in 2022. Inflation worries hit the growth stocks the most. Some of the beaten-down growth stocks this year include: Roku (-26.54%), Twilio (-20.15%), Teladoc Health (-52.60%), Robinhood (-45.72%) and Pinterest(-45.03%).
- Meme stocks: Small investors piled into stocks in 2021, banding together on online forums like Reddit's WallStreetBets to create a buying frenzy over certain companies like GameStop. The financially struggling video-game retailer surged more than 1,600% in January. The mania led to big losses for some hedge funds, multiple halts in trading and congressional hearings asking who was getting hurt. Some of these meme stocks are still up quite well year to date, for example: Gamestop (+781.97%) and AMC (+1,318.91%).
- China tech crackdown: More than $1 trillion of the value has been wiped off from high-flying Chinese tech companies on foreign stock exchanges after the ruling Communist Party tightened control over their industries. Alibaba Group (-47.92%), the world's biggest e-commerce company by sales volume, was fined $2.8 billion on charges it suppressed competition. Because of regulatory problems Didi Global Inc., China's dominant ride-hailing service, had to announce that it will be delisting from NYSE and is down more than 60% from its IPO price.
- Chip shortage: A global chip shortage had repercussions across much of the economy in 2021. Angry consumers who faced delays in getting new cars, video-game consoles and an array of other products. The shortage had its origins in the outbreak of the COVID-19 pandemic, starting with the lockdowns shuttering Asian semiconductor factories in early 2020. However, it has to be mentioned that many semiconductor manufacturers have posted double and even triple digit gains this year because of the high demand and the interest that they got from investors, here are some of them: NVIDIA (+126.02%), AMD (+58.33%) and QUALCOMM (+23.06%), however the whole silicon industry has been big gainer as well, iShares Semiconductor ETF (ticker: SOXX) is up 43.23% YTD.
- Record year for IPOs: 2021 saw a record number of companies go public. According to PitchBook, a Morningstar company, nearly 1,500 companies went public worldwide this year as of Dec. 14, raising almost $500 billion. That's about double the number of deals and capital raised in 2020. The biggest global IPOs of 2021 include: Coinbase (Deal Size: $37.7 billion), Roblox (Deal Size: $13.8 billion) which has gained 46.50% since IPO, Wise (Deal Size: $12.2 billion), Rivian (Deal Size: $11.9 billion) and chipmaker Globalfoundries (Deal Size: $2.6 billion) which is up 33% since IPO.
We would also like to mention some of the top-performing stocks in 2021: BioNTech (197.78%) and Moderna (123.74%) from Healthcare sector. Devon Energy (160.69%) and Marathon Oil (134.26%) from Energy sector. Synaptics (185.71%), NVIDIA (126.02%) from Technology sector. Bath & Body Works (117.19%) and Macy’s (124.06%) from Retail. Lucid Group (274.90%) and Ford Motor (137.68%) from Automotive sector.
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