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2021 markets year in review: An overall perspective

2021 markets year in review: An overall perspective

A lot can happen in a year. That’s why a market year in review is important. This rings especially true for the last couple of years, and perhaps even so for most Americans. Recent history has proved to all of us that nothing is certain, and no matter how hard we try, ultimately, no one knows what tomorrow may hold. 

Economies and stock markets are increasingly sensitive to events like those of 2021. News spreads faster than ever, and even speculation could sometimes be more than enough to move the needle. Although we might never become the perfect market prognosticators, it’s still important to learn from the past, so here’s what we learned in 2021. 

The economy

Inflation

Our last CPI report for 2021 revealed an inflation rate of 6.8% higher relative to that time last year. That’s considered the highest since 1982, but we need the bigger picture. The US has averaged 1.9% annual inflation in the previous four years, and it’s steadily hovered between 1.5% to 3% over the last 30 years.

Wondering what are the effects of inflation on investing? 

2021 markets year in review: An overall perspective

Macro trends. Inflation since 1960 via [The Conversation]

Supply & demand

In 2021, we got a true picture of how supply and demand work in the real world when one outpaces the other. Supply chain kinks caused by a lingering pandemic, labor shortages, and maybe a ship that was stuck in the Suez Canal for a week, combined with some pent up, angsty consumer demand fueled by extra savings and government stimulus to create a perfect recipe for shortages, and yet another reason for price increases. 

The great resignation

Most recent data shows that Americans had been resigning at a record rate of 3%, or 4.5 million, in November. 1.6 million people have joined an anti-work subreddit, some are evaluating job alternatives in the metaverse, and more are shifting their work to a remote setting. Labor shortages remained an issue in specific industries, yet we’ve just simultaneously reached a shallow unemployment rate of 3.9%. Something must be up, right? 

The Bottom Line

There are many potential takeaways from the economic events of 2021 that it’s difficult to discern between them. Nevertheless, the bigger picture might be the fact that none of us knows what tomorrow holds, and the world as we know it can begin to shift below our feet at any given time, having rippling consequences on everything around us. 

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The markets

Meme stocks

Gamestop might be the big name associated with meme stocks, but it brought along a lot of friends with it. Stocks like $KOSS, $NAKD, $AMC, $EXPR, and others benefited from the meme stock movement, seeing stock prices fluctuate considerably during 2021.

Meme Stocks: How it all started. 

Historical returns

The S&P 500 has brought an average return of approximately 15.7% over the 5 years between 2016 and 2020, but in 2021, the famed index was up 28%. The Nasdaq and the Dow also boasted quality ROI on the year in what seemed to be a historically great time to be invested. 

Large caps stole the show

After the meme stock jubilee in early 2021 and a haircut over the next few months, small caps have had a tough time overcoming their newfound stigma in conjunction with fears of contractionary policies coming soon. 

The Bottom Line

The biggest takeaway from the 2021 markets might be this; markets experience trends and cycles just like everything else. Experienced investors are well aware of this, but 2020-2021 saw millions of new individual buyers enter the markets, and it’s a lesson we can all be taught again. 

Modern Assets

NFTs

The NFT market officially reached trending status in 2021, and it could just be getting started. Google Trends volume for the keyword didn’t even hit its peak until the week of December 12th, and the snowball of interest seems to continue to grow as more and more celebrities partner up with projects or buy their own.

Why are cryptopunks so expensive? Find out what are cryptopunks and why they are so expensive. 

2021 markets year in review: An overall perspective

NFT search volume over 5 years via [Google Trends]

Funding

Venture funding for blockchain and crypto-related companies took off in 2021. Venture capitalists poured in $23.1 billion in 2021, 6.7x the 2020 total, and 4.5x the 2019 value. What does this mean? This might equal growing interest from equity investors in this technology.

2021 markets year in review: An overall perspective

Via [CoinDesk]

Regulation

Discussions surrounding the regulation of crypto-assets became a major talking point in 2021, especially after new SEC Chairman Gary Gensler took over in Q2. What exactly this might entail remains to be seen. Some see it as bullish, while others wish the government would stay out of it. Who’s right?

The Bitcoin ETF

2021 brought us our first “Bitcoin” ETF, which isn’t exactly a real Bitcoin ETF. For now, the $BTC funds on the market are futures ETFs that trade futures contracts solely on the coin, not bitty itself. A spot ETF is something that crypto fans have lusted after for a while, but it doesn’t seem fully baked just yet. 

The Bottom Line

2021 was an action-filled yet arduous year for crypto and its followers. After a run-up in the first half of the year, crypto has found some rough patches and hopefully reminded many that this could be the kind of thing you play the long game in, looking toward the macro picture rather than recent events. 

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