Top 5 Stock Market Trends To Remember in 2021
#4: 2021 will have been a record year for IPOs.
Stock markets have been surprising in 2021. While many thought that the S&P 500 and Dow Jones would stall, they did not. The ultra-accommodative monetary policy of the Fed and other central banks continued to support the market. The S&P 500 ended the year at a record high near 4,800 points.
Even though the Fed has already announced that it will tighten its monetary policy in 2022 to fight against the extremely high inflation in America, it is quite conceivable that the S&P 500 will exceed 5,000 points in the first quarter of 2022.
In the meantime, it's worth looking back at the 5 major trends that have shaped the stock markets in 2021. From the failure of Chinese real estate behemoth Evergrande to the wild ride of Tesla and electric vehicle manufacturers, here's what you need to remember.
1. Small investors have taken Wall Street by storm
Savers have become very passionate about the stock market in 2021. The number of individuals active in the financial markets surged with the first confinements in 2020, and the trend has been confirmed in 2021. A craze that culminated during the summer of 2021 in the United States with the listing of the famous broker Robinhood, champion of the democratization of finance and “commission-free”.
The trend has been confirmed almost everywhere else in the world. Let's take France as an example. More than 2.5 million French people have carried out a stock market transaction each quarter on the Paris stock exchange, compared to about 1 million before the crisis. Younger, less affluent, and much more active profiles. A windfall for neo-brokers such as Bux, Trade Republic, or more recently Lydia, who have set out to conquer the French stock market.
This upturn has not gone unnoticed by the regulators. On both sides of the Atlantic, financial supervisors are now looking at strengthening the supervision of online brokers.
2. Tesla and its rivals electrified the markets
Tesla's wild ride on the stock market has continued into 2021. After joining the S&P 500 index in 2020, the electric car pioneer has made a stunning entry into the very closed club of companies valued at more than 1,000 billion dollars. The American group weighs more on the stock market than all the traditional car manufacturers.
Tesla's boss Elon Musk has benefited from this. Tesla's soaring share price has made him the richest man in the world with over $270 billion, far ahead of Amazon founder Jeff Bezos. He is not the only one to have surfed on the electric vehicle craze. Dozens of start-ups have benefited from the extreme valuations of the sector on the markets, via IPOs, like Rivian, or through a merger with one of the many SPACs to have emerged this year, like Lucid.
3. The real estate giant Evergrande has given substance to the Chinese risk
The ups and downs of the Chinese real estate development behemoth Evergrande have kept the financial markets on edge in recent months. Unable to cope with its mountain of debt - more than $300 billion in total - the Chinese group has sought every means to avoid default in order not to destabilize the financial ecosystem.
Evergrande's difficulties have certainly captivated investors around the world, but their impact on the markets has remained limited to the Chinese stock exchanges. It must be said that Evergrande's offshore debt is "only" 18 billion dollars, which seems to be something largely manageable on a global scale. After several months of procrastination, Beijing seems decided to intervene. It remains to be seen what impact its failure will have on the growth of the country, the engine of the global economy.
4. 2021 will have been a record year for IPOs
2021 stands out as the most active year in 20 years. 2,388 new companies worldwide joined the list this year, 64% more than last year. In total, they raised $453.3 billion, according to EY. High valuations, an influx of liquidity due to supportive fiscal and monetary policies, and low bond yields all encouraged companies to join the stock market and investors to buy stocks.
The biggest deal of the year, Rivian, the electric pickup truck maker, raised $13.7 billion on Wall Street. Its valuation reached as high as $153 billion, even though the company founded in 2009 has just delivered its first vehicles.
Others have performed less well. Swedish oat milk specialist Oatly, which raised $1.4 billion on Wall Street in May 2021, has since seen its share price fall by 40%, while meal delivery company Deliveroo, which raised £1.5 billion in London, has lost more than 50% since March 2021. The tech sector has seen the most deals with 611 IPOs - 26% of the global total - and has raised $147.5 billion.
5. Interest in SPACs is still strong, although some investors are disappointed
These empty shells that come to the stock market to buy out a company, have alone managed to raise a total of about $160 billion (+97% compared to 2020). These funds represent more than 30% of the total proceeds of IPOs. The United States remains the place of choice for these new kinds of stock market vehicles.
In Europe, 2021 was a year of takeoff. Thirty-nine SPACs made their first steps on the stock exchanges. They have become a real issue for the stock exchanges. London has been grooming its stock exchange law to make the City more attractive. In mid-November, the Swiss stock exchange operator, SIX, changed its rules to better accommodate these operations.
But the development of these vehicles has been uneven. The promises made to investors are not always kept. I invite you to read the story of Donald Trump and the magical SPAC. In the U.S., 44% of SPACs introduced in 2017 had not yet found a target by 2020... And on average in the 12 months after SPACs acquired their target, the overall loss in value is as high as 35%.
Some reading
Stock Markets 2022: Fog on the Horizon. No consensus on a trend for 2022 is emerging. Everyone is afraid to be too cautious as the S&P 500 approaches 5,000 points.
Here Is What Jordan Belfort, Nick Leeson, and Martin Shkreli Think About Bitcoin and Cryptocurrencies. A way to see that the scammers of the cryptocurrency world were largely inspired by the techniques invented by these former Wolves of Wall Street.
The Year 2021 in 10 Key Moments for Bitcoin. 2022 will be an even more exceptional year for you if you are a Bitcoin HODLer.