This time last year we were describing 2020 as unprecedented, as “a year like no other”, well 2021 certainly gave it a run for its money. After spending all of 2020 trying to come to terms with the global COVID-19 pandemic, 2021 was meant to be the year of optimism and hope, we saw the introduction of safe & effective vaccines, we thought we finally had the pandemic under control. This renewed consumer confidence led to a surge in Economic activity which itself led to many additional problems such as supply chain issues and record levels of Inflation. Despite these many potential headwinds Global financial markets continued to perform very strongly throughout the year with many major Equity Indices hit all-time highs before seeing some reversal in Q4

While we are all well aware of the mantra “past performance is not a guide to future performance” it can still be beneficial to look back, reflect on how markets have performed and more importantly see if this information can be used to shape future investment decisions. With that in mind, Let’s have a look at how some of the major market Indices performed throughout the year

The MSCI World Index, which is a benchmark Index for the Global Economy rose by 17% over the course of the year and is just 0.5% off its all-time high which it set in November (before Omicron fears caused a sell-off). Financial Markets in general have shown surprising strength despite many headwinds, the most obvious being the ongoing pandemic and increased inflation. Unlike 2021, Volatility was noticeably absent last year, there was only one single 5% market correction during 2021, the historical average is nearly three such events per year.

2021 was a record-breaking year, many major financial indexes hit their all-time highest levels. In the US the benchmark index for equity performance is the S&P 500, it grew by 26.9% and hit its all-time high in December, this was its strongest performance since 2013. The other major US Index, The Nasdaq which is more focused on Tech stocks, finished the year +21.4%. One major concern is the fact that the growth in US Markets is being driven by a small number of tech stocks. In early December, just 5 stocks—Microsoft, Google, Apple, Nvidia and Tesla accounted for 51% of the S&P 500’s return since April, this is a dangerously high level of concentration.

The Eurostoxx50 is the European benchmark Index which tracks the performance of the 50 biggest companies across the Eurozone, this year the Index grew by 20.59%. The STOXX Europe 600 which has a much wider mix of businesses also performed strongly and finished +21.44%.

Closer to home, Britain’s blue-chip FTSE 100 Index ended 2021 with its best annual performance in 5years. The FTSE gained 14.3% in 2021 but underperformed when compared to its European and US peers.

Here in Ireland the ISEQ Index finished the year +14% with the biggest gainers being Kingspan +80% and Uniphar up by more than 50%. Biggest faller in the ISEQ was Paddy Power/Flutter -18.5%.

In commodity Markets Oil posted its biggest annual gains in 12 years, up 50.5%, spurred by the reopening of many economies following Covid 19 lockdowns. Energy demand picked up as lockdowns eased and travel resumed, while OPEC supported prices by gradually increasing production month on month. One surprise in 2021 was the poor performance of gold prices. Gold has traditionally always been seen as a ‘Hedge’ against inflation. This argument was questioned this year as the precious metals value fell steadily even in the face of rising Inflation.

In terms of 2022, what does the year ahead hold for Investors? After 2 of the strangest years on record and Equity markets at record high levels, I’m sure Investors would be happy with some level of Normality returning. As for what level of returns we can expect in 2022, who knows? As they say, “you should never try to make predictions, especially about the future”

The same fundamental rules apply as always, before undertaking any form of Investment you should always carry out a thorough assessment of your risk profile but also give due thought to your capacity for loss.

 

Barry Kerr CFP® is Founder & Managing Director of Wealthwise Financial Planning who are based in Carrick on Shannon and Galway. All details and views contained within this article are for informational purposes only and does not constitute advice. Wealthwise Financial Planning makes no representations as to the accuracy, completeness or suitability of any information and will not be liable for any errors, omissions or any losses arising from its use. Wealthwise Financial Ltd T/A Wealthwise Financial Planning is Regulated by the central Bank of Ireland #CI6614