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After a Great Year, Stocks End 2021 Flat, The Year Investing Democratization Took the Center Stage & What to Look for in 2022

Stocks flat in mid-day trading after great year.

Amid low volume U.S. markets were generally flat, but stocks are capping off on of the best years in recent memory with the Dow up 18.80% to 36,359, the NASDAQ rising by 21.95% to 15,716 and the S&P 500 increasing by 27.18% to 4,777 for its best annual run since 2010.

In Europe the FTSE 100 finished the year up 14.16% to 7,384, the DAX rose by 15.79% to 15,885 and the CAC 40 led the way with an increase of 28.82% to finish 2021 trading at 7,153.

As we look ahead to 2022 many headwinds remain from the ongoing global pandemic, rising inflation and the prospect of tighter monetary conditions as The Fed threatens to maybe just maybe remove the massive accommodation that the Market has become addicted to. 

Recently writing in Forbes, Bill Conerly had on of the best descriptions of where The Fed currently is: “The Federal Reserve has penciled out ideas about when they will tighten, but it has not written them in ink. Investors and corporate leaders should also consider the many other influences on stock prices, ranging from Covid-19 and domestic spending to global political and economic crises. The new monetary policy, however, will be a large negative influence.”

No matter what the Central Banks do in 2022 there has been a collective sigh of relief that the recently surging Omicron variant of Covid-19 does not appear to be as dangerous as initially feared, this despite its incredible transmission rate which is see case records that seemed unimaginable earlier this year.

Know your Meme, and other weird stuff

2021s surely the year that the “democratization” of investing led to some strange results in the markets.  Fun highlights included the massive effect that Reddit and the heretofore little known WallStreetBets would have on stocks prices. 

GameStop (GME up 721%) was the poster child for Stonks, Diamond Hands, Tendies and going To The Moon, there were others as well.  AMC Entertainment (AMC) rose over 1,200% despite not being able to open theatres at various points during the year, both BlackBerry (BB) and Bed Bath Beyond (BBY) benefited at point during the year before fading. 

However, Hertz “the original meme stock” takes the cake as driven by Reddit small investors bought the bankrupt businesses shares at less than $1 in May of 2020 as HTZ’s bankruptcy case began.  Normally this sort of investment would be an easy way to light money on fire, but the effects of the pandemic turned the shares into lottery tickets as used cars became scare and residual values increased.  Bondholder were made whole and Hertz’s equity holders received a recovery package of stock and warrants that often returned 10x or higher multiples to those that bought in during Hertz’s worst days.

I won’t even start to explain how this Deli in Paulsboro N.J. was worth more than $100 million at one point.

Looking forward to 2022

Here at Surf’s Up! We hope 2021 has been a good one and we wish you the best for 2022.  Our writers and team will be back next week to bring you our thoughts on the News and Markets.  Until then take care and stay safe as we ring in the New Year!

“Year’s end is neither an end nor a beginning but a going on.”

Hal Borland

Richard Ellison, CFA CAIA

Consultant

 

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