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Market Update
January 6, 2022

Q4 Market Commentary - Would You Have Invested If You’d Known?

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2021 End Of Year Market Review

Imagine on 1 January 2021 someone found a newspaper which foretold all the events of the following 12 months. It would tell of rioters attacking the US Capital building, the Taliban swiftly reasserting control of Afghanistan, a UN climate report warning of ‘code red for humanity’ and of course several new COVID-19 variants, continued restrictions on daily life and ongoing disruption to industries and businesses.

Now how do you think that person would have invested knowing all that was going to happen? My guess would be they probably would have steered well clear of the stock market, and perhaps invested in less risky assets like bonds. Had they done that though, they would have missed out on a very good year for the stock market.

As always, you can’t really draw many conclusions from 12 months of returns, as they’re unlikely to have much bearing on future performance. So rather than react to recent short-term gains and losses, we think it’s best to stay focused on your long-term investment plan. That of course should involve a well-diversified portfolio, giving your wealth the best chance to whether whatever market conditions are in store for 2022 and beyond.

Download the full brochure to read the review.

2021’s biggest winners and losers.

USA Leads The Way

Overall it was an excellent year for equity investors. During 2021 the global stock market rose 18.5%. It owes a large part of this to the continuing strong gains of the USA, which now makes up over 60% of the total global market.

Both the UK and European stock markets also delivered good growth and while still delivering positive numbers, it wasn’t such a great year for developed markets in the Asia Pacific region, which could only manage a 2.6% return.

China Concerns

It was a different story in 2021 for emerging markets, which fell 2.6% over the year. This was in no small part to the performance of China, which makes up over a third of emerging equity markets. The world’s second biggest economy and third largest stock market fell sharply by 21.7%.

Find out why by downloading our full 2021 review at the bottom of the article.

Sector surprises

With rapidly rising energy costs due to disrupted supplies and high demand, the Energy sector was actually the best performing of the major sectors in 2021, gaining a whopping 36%.

Past performance is not a guide to the future.Source: FE Analytics to 31 December 2021
Inflation beats bonds

On the whole 2021 was a disappointing year for bonds. The global investment-grade bond market (around two-thirds government bonds) fell moderately, losing 2.9% in the 12 months to 31 December 2021.

Find out why bonds fall when inflation picks up or if interest rates begin to rise by downloading the full 2021 review.

Gold loses its shine, commodities climb

Gold also disappointed investors in 2021, losing 4.3%. Many invested in the yellow metal following its strong performance in 2020, when it beat the stock market.

Broader commodities had a very strong year, beating equities by delivering a return of 27.1%. Energy, which makes up a significant part of the commodities market, played a big part in this, due to the previously mentioned price rises. Commodities’ recent returns will inevitably attract investment, however, we think investors should look at the trend in commodities – find out more by downloading the full 2021 review.

Past performance is not a guide to the future. Source: FE Analytics to 31 December 2021
Tales from the crypto

Although we don’t invest in cryptocurrencies, we know some readers will want to know how Bitcoin fared in 2021 – it delivered a substantial 62.6% return.

Download the full brochure to find out why despite high annual return, most new investors in Bitcoin in 2021 likely actually lost money.

All data in USD terms to 31 December 2021

Written By
Jonathon Curtis
Head of Investments
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Market Overview.