Photo: Chris J. Ratcliffe / Bloomberg
Global stock markets ended in 2021 double-digit growth for the third year in a row, as expansionary monetary policy and the flow of fiscal stimulus helped rebuild the pandemic economy.
The FTSE All-World stock index rose by 16.7% in dollar terms in 2021, exceeding the growth of 14.1% from the previous year. However, the jump is weaker than the reported increase of 24% in 2019, the year before the coronavirus crisis, writes FT.
Supportive policies from many of the largest central Banks around the world have helped boost financial markets, backed by stimulus packages, the deployment of coronavirus vaccination and a break from the stringent restrictions imposed in an effort to curb the spread of the virus.
The prospect of central banks removing support for financial markets from the crisis era, along with the growing Covid-19 cases stemming from the rapid proliferation of the omicron option, threatens to change investor sentiment. However, stock markets have managed to overcome increased volatility.
Favorable conditions have helped corporate financial performance recover from the losses it suffered in 2020, when the pandemic hit economic activity.
Companies have largely managed to deliver a sharp rise in prices, as economic demand has outpaced supply, which has allowed them to take advantage of the reopening of the global economy.
In the US, annual earnings growth is expected to reach 45 percent after the fourth quarter reports are published. If realized, it will be a record since 2008, according to FactSet.
“There is a shortage of every commodity you can think of, rapid inflation, political struggles , racial and class wars, but it also has some of the best corporate profits to date, ”said Jim Paulson, chief investment strategist at Leuthold Group. “It’s strange, but it’s hard to keep the stock market in the face of such a revival,” he added.
Growth in global stock markets is particularly pronounced in the United States. Wall Street’s S&P 500 index rose 27% in 2021, driven by a nearly 50% jump in energy stocks backed by higher oil prices. The shares of companies in the real estate sector are growing by over 40%.
Devon Energy leads the companies in the index with almost 190% increase in shares. A total of 11 companies have almost doubled their market value, including Ford Motor, Moderna and Marathon Oil.
This is a change from the previous two years, when the technology sector, which grew by 33% for 2021, dragged the market up. Cathie Wood’s Ark Innovation fund fell more than 23% this year, up from 150% in 2020 on bets on some of the best-performing technology companies in the pandemic.
Nevertheless, the largest technology stocks still stand out as the driving force behind the growth of the S&P 500. Their colossal size compared to other companies makes even a relatively small increase in stock price
The six largest companies with the biggest contributors to the growth of the S&P 500 are big technology names led by Microsoft and Apple, the two most Biggest companies in the world by market capitalization.
Technology is pushing up markets in Europe as well. The pan-European Stoxx 600 index is up 22% in 2021. This is the second best performance of the index since 2009 – it rose 23% in 2019.
In Asia, Japanese stocks also enjoyed a strong year, with the Topix index rising 10.4% compared to a rise of less than 5% in 2020
) However, in contrast to strong gains in developed markets, Hong Kong’s Hang Seng index sank by more than 14 percent due to Beijing’s regulatory crackdown on the education and technology sectors. Mainland China’s CSI 300 fell more than 5 percent.
The decline contributed to the 5.3 percent decline in dollar terms in the broader MSCI Emerging Markets index. A similar MSCI index, which excludes Chinese stocks, will rise by more than 9 percent in 2021
Looking ahead to 2022, investors remain cautiously optimistic about the potential of stocks to continue rising. your trajectory. Covid-19 cases continue to rise around the world amid concerns about how the new strain could affect supply chains, commodity prices and company performance. The dizzying fluctuations in the stock market since the advent of the omicron option underscore how confidence can be shaken by unexpected reversals in the pandemic.
At the same time, tightening monetary policy is another promising wind for next year. The US Federal Reserve is expected to triple interest rates in 2022 as the central bank moves toward reducing inflationary pressures. The Fed also outlined plans in December to double the pace of withdrawing its $ 120 billion-a-month bond-buying program since the start of the pandemic.
However, the rapid Rising stock prices relative to other asset classes means they will remain attractive in the new year, investors say. However, some adjustment is expected by the end of the first quarter, followed by a rally by the end of the first half.
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