Stock markets in 2021: from big tech and crypto to takeovers | Stock markets

TFinancial markets climbed a wall of worry until 2021, as investors pushed up asset prices amid still high inflation, a global supply chain crisis and one of the most speculative booms. more frantic in decades.

Stocks hit all-time highs as money poured into stocks, trades skyrocketed, and investment gamification hit new highs. Here are some of the highlights of a roller coaster year.

Meme stock chaos

The GameStop share price rose 1,700% in one month, but plunged after trading was dragged down by the Robinhood app. Photograph: John Minchillo / AP

The drama of the year began on Wall Street, where groups of retail traders teamed up through online forums to attempt one of the biggest short cuts in market history.

Organized through Reddit’s Wall Street Bets group, they focused on depreciated stocks that hedge funds had sold short (by selling borrowed stocks, planning to buy them back cheaper in the future).

In a frenzy that gripped Wall Street, the WSB military used two weapons to reduce hedges: call options – derivatives that gave the right to buy stocks at a certain price – and memes, to fuel their orchestrated purchases, as they tapped into audiences. disgust with predatory speculators.

The phenomenon started with GameStop, the American video game retailer, which raised its share price an astonishing 1,700% in one month and briefly rocked the markets as hedge funds took huge losses. trying to buy back borrowed stocks.

But that squeeze was dramatically and controversially halted after the Robinhood trading app restricted stock buying. He blamed the demands of his clearing houses; r / wallstreetbets has screamed scandal, although a lawsuit claiming a conspiracy with market maker Citadel Securities was dismissed last month.

The saga has resulted in the entry of a new vocabulary into the markets, with “diamond hand” traders refusing to fold their positions, and others shouting “yolo” (you only live once) while ‘they were engaging in risky but potentially lucrative transactions.

This GameStop frenzy repeated itself with the cinema group AMC, the chain of stores Bed Bath & Beyond and the car rental group Avis, igniting several times throughout the year.

Those rallies ended in tears for some retail traders, who ended up with the bag as stocks of memes plummeted. But despite falling in late December, GameStop is still up 700% this year, with AMC around 1,200% higher.

Spacs Race

Bird store front
Electric scooter rental company Bird was among the companies to go public via a Spac on the New York Stock Exchange. Photograph: Spencer Platt / Getty Images

Acquisition companies with a specific vocation (Spacs) – created to buy other companies still unknown – also exploded at the beginning of the year, before running out of steam because some performed poorly. In December, a fund that tracked Spacs was down more than 20% for the year, while the S&P 500 was up more than a quarter.

This speculative fever has been fueled by a lot of money flowing through the system, thanks to record interest rates and pandemic stimulus packages.

“The big theme remains how the price of all financial assets remains grossly inflated on both a relative and a pure basis,” says Bill Blain, strategist at Shard Capital.

“Monetary distortion”

Federal Reserve
The US Federal Reserve continued to buy $ 120 billion in bonds each month. Photograph: J Scott Applewhite / AP

Central bankers continued their ultra-accommodative monetary policy until 2021, repeatedly appeasing markets that the price hike would be temporary. The U.S. Federal Reserve continued to buy $ 120 billion (£ 89 billion) of bonds each month, but finally began cutting the program in November as inflation hit its highest level in decades.

This “currency distortion” has distorted the way people view capitalist free markets, Blain argues. “The distortion of the prices of financial assets creates all kinds of unintended consequences – from blocking the normal ‘business cycle’ by allowing obsolete zombie companies to survive, by stifling and distorting business developments, to facilitating the misdirection of capital in the economy. “

Or, as the Wall Street Bets crowd puts it, “the money printer is going to brrr”.

Cryptomania

These massive distortions were most evident in the cryptocurrency market, where the combined value of bitcoin, ethereum, and new entrants such as solano hit $ 3 billion in the summer, before prices cooled later. during this year.

Crypto has reached key milestones – El Salvador became the first country to make bitcoin legal tender, in a technically glitchy launch – but there have also been several rocky crashes, including a Chinese crackdown on it. bitcoin mining. After hitting record highs of around $ 69,000, bitcoin ends the year below $ 50,000, up 64% for the year.

Supply chain shocks

Never given container ship
Global supply chain problems intensified when the container ship Ever Given blocked the Suez Canal in March. Photograph: Suez Canal Authority / EPA

Supply chain problems have gripped the global economy, with dire consequences for stocks of raw materials. Covid’s disruption of trade networks and factory production was exacerbated after the container ship Ever Given got stuck in the Suez Canal in March.

While iron ore and copper have seen volatility, lumber prices have really stood out. They surged in the first half of 2021, jumping 400% to a high of $ 1,700 per thousand board feet in May amid a supply shortage. But prices then plummeted when builders put construction projects on hold. Farm inflation has also hit people in the pocket. Global food prices have reached 10-year highs, with corn and wheat increasing by 20% and arabica coffee bean prices increasing by 80%.

If investors had known on January 1 that US inflation would hit 6.8%, a 39-year high, in November, they would have been forgiven for investing in gold. But traditional inflation hedging had its worst year since 2015, losing around 4% and lagging behind many other assets.

Inflation has also affected fixed income assets, with global bond markets on track to experience their worst year since 1999.

Overall, the UK FTSE 100 had a strong year, gaining around 14%. Wall Street posted strong gains, with the Nasdaq Composite up 21% and the Broad S&P 500 Index up 28% in the year, including a remarkable 70 records.

Technological stock

Zoom meeting on laptop
Video conferencing operator Zoom fell 45% during the year. Photograph: Max Rastello / Alamy

Big tech has gotten more and more powerful, with Apple, Google, Microsoft, Nvidia and Tesla accounting for over a third of the S&P 500 returns this year.

But smaller, less profitable tech stocks fell, as their pandemic sales growth slowed and the U.S. Federal Reserve moved towards an interest rate hike next year, dampening their appeal as growth stocks.

An unprofitable US tech equity index created by Goldman Sachs was crushed in November. By the end of the year, the tech IPO bull market turned bearish, with most US tech fleets at at least 20% of their all-time high.

Video conferencing operator Zoom fell 45% during the year, while Peloton fell 75% near its pre-pandemic lows, dragged down by a reluctant appearance in Sex and the City.

“In the extreme, stocks that would not have seemed out of place in the 2000/2001 tech bubble are on average 60% lower than at the start of the year,” said David Miller, investment director at Quilter Cheviot.

“Chinese tech companies are down by a similar amount, but for different reasons. The growth-value rotation always evoked by one-round strategists seems to have already taken place. ”

chinese crisis

Hand on the wheel
Shares of Chinese ridesharing service Didi plunged after the government crackdown on tech companies. Photograph: Tingshu Wang / Reuters

Beijing has scared the markets several times, with indebted real estate group Evergrande threatening to cause a disorderly collapse and shake up the Chinese economy.

Over the summer, President Xi Jinping launched a crackdown on tech companies, plunging the shares of overseas-listed companies such as the ride-sharing service Didi. Restrictions on the education sector and tighter controls on children playing video games have also rocked some stocks.

Takeover frenzy

Sarah Jessica Parker and Chris Noth in And Just Like That
The biggest deals this year included the merger of WarnerMedia with rival Discovery. Photograph: Steve Sands / NewYorkNewswire / Bauer-Griffin / REX / Shutterstock

It has been a banner year for global merger and acquisition (M&A) activity, with capital accumulations and skyrocketing valuations leading to a flurry of transactions. The value of mergers and acquisitions exceeded $ 5 billion worldwide for the first time, according to Dealogic data, breaking the record of $ 4.42 billion set in 2007, before the financial crisis.

But seasoned investor Charlie Munger cautioned this month. Munger, 97, told a conference that the markets were significantly overvalued in places, warning that “I consider these times to be even crazier times than the dotcom era.”


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