As the year draws to a close, it’s a case of “here we go again” as the latest Covid-19 variant threatens yet another wave of lockdowns.
The uncertainty seems endless but stock markets have been surprisingly buoyant in 2021, given that uncertainty is what they are supposed to hate most.
At the time of writing, the S&P 500 has climbed almost 1,000 points from 3,700 to 4,701 year-to-date, an increase of 27 per cent.
Investors are shrugging off the Omicron variant threat for now and some analysts even anticipate a good old-fashioned share price “Santa rally”.
In a positive sign, Chinese exports hit a record high in November, despite fears of supply chain friction, Joshua Mahony, senior market analyst at online trading platform IG, says. “European markets are showing a consistently positive outlook as investors pre-empt positive South African Omicron data.”
Investors are hoping that “despite a surge in Covid cases and hospital admissions, the mild symptoms are expected to keep deaths well below levels seen in prior waves”, Mr Mahony adds.
That outlook could flip in a moment, of course, but for now it looks brighter than many might have expected.
While travel companies have hit yet more turbulence, bookings for spring and summer are holding up, as holidaymakers gamble that the weaker Omicron virus signals the end of the pandemic.
Some investors will have made some decent returns this year but others may have bitten off more than they could chew in the meme stocks craze that gripped markets in January.
Perhaps this year’s biggest surprise is that GameStop is ending the year in good form, even though the frenzy has abated, trading at $167. AFP
GameStop was an ailing Texas-based brick-and-mortar video game retailer, until private traders on Reddit’s stock trading discussion group Wallstreetbets and social media platforms TikTok and Stocktwits joined forces to fight the hedge funds that were heavily shorting the stock.
They drove GameStop’s stock price up from $17 to a peak of $347.51 on January 27, a rise of almost 1,950 per cent.
There were further flurries of activity in March and June and those who bought at the right time made small fortunes, but those who got it wrong lost out. Especially if they leveraged up on low-cost apps such as Robinhood.
Perhaps this year’s biggest surprise is that GameStop is ending the year in good form, even though the frenzy has abated, trading at $167.
“Utter bewilderment is the only rational response,” Laith Khalaf, head of investment analysis at AJ Bell, says.
The same could be said for electric car maker Tesla, as founder Elon Musk continued to live up to his maverick reputation by talking down his own company stock and posting a Twitter poll asking whether he should sell 10 per cent of his stock, worth more than $20 billion at the time.
The result? Some $200bn was wiped off the stock’s value in two days. The company is still worth a cool $1 trillion, though.
Along with Omicron, inflation is the other big worry now, with US price growth hitting 6.2 per cent in the year to October. Many thought this would signal the end both of today’s bull market and US tech dominance, but so far it hasn’t happened.
Apple trades 32 per cent higher year-to-date at $175 and may soon become the world’s first $3tn company, while Microsoft is up 54 per cent to $335, lifting its market cap to a cool $2.5tn.
This was a crazy year for cryptocurrencies, with Bitcoin opening at $29,388 in January and peaking at $67,582 on November 8, having more than doubled.
It has since slipped back to just below $50,000 but that is still a rise of more than 70 per cent for the year.
Shares and cryptos have been driven by central bank stimulus and could struggle if we see new virus-linked lockdowns, given that governments have now exhausted fiscal support
Fawad Razaqzada, market analyst, Think Markets
It could climb higher. Anton Altement, chief executive of Polybius and OSOM Finance, predicted in the summer that Bitcoin will end 2021 trading at $70,000 and is sticking with that view. “I don’t expect such sharp upswings in 2022, but expect it to range from $70,000 to $100,000.”
Dog-related meme coins such as Dogecoin and Shibu Inu came and went, then came and went again. Ethereum quietly went about its business, climbing from $731 in January to a high of $4,819 on November 8, a rise of 560 per cent.
Ethereum currently trades at $4,348 and Mr Altement thinks it will be 2022’s cryptocurrency winner. “I see it going to $7,000 or beyond on the back of network improvements, assuming upgrade ETH 2.0 launches.”
However, Fawad Razaqzada, market analyst at Think Markets, is cautious about shares and cryptocurrencies.
“Both have been driven by central bank stimulus and could struggle if we see new virus-linked lockdowns, given that governments have now exhausted fiscal support.”
This year saw the emergence of another investment nobody quite gets, known as non-fungible tokens, or NFTs, which ended up being voted Collins Dictionary’s word of the year.
Even if you don’t understand NFTs, they are here to stay, Viktor Prokopenya, founder of cryptocurrency platform Capital.com, says.
He describes NFTs as “digital collectables” that make creative works, such as art, sporting moments and even computer coding, unique and therefore highly prized.
“Scarcity creates opportunities for new forms of digital art to exist and can create an entirely new market for artists,” Mr Prokopenya says.
It is an entirely new market for investors, too, but prices are already booming, with internet founder Tim Berners-Lee in July selling the underlying web source code as an NFT for $5.4 million.
While cryptocurrency, NFTs, meme stocks and other hot new trends inspire fear and greed in equal measure, investors should apply the age-old investment motto and never put all their eggs in one basket. Only invest as part of a balanced portfolio heavy alongside old standbys such as shares, bonds, cash, gold, property and commodities.
As you count your gains or nurse your losses at the end of the year, remember to keep the rest of your finances in order, Emma Watson, head of financial planning and advisory services at Rathbone Investment Management, says.
This will be particularly important if inflation lets rip and prices fly even higher. “Although it’s important to enjoy ourselves, especially now, it is equally as crucial to live within your means and maintain positive savings habits,” Ms Watson says.
If you have spent the year chasing meme stocks and cryptocurrency trends, now is the time to come back to earth and do some basic budgeting.
Ms Watson suggests working out what essential spending you have each month, such as mortgage repayments or rent, food, household bills and savings. “Then calculate your remaining disposable income to see how much fun you can afford over Christmas and into the New Year.”
It’s important to remember to keep putting money away regularly towards your longer-term goals
Emma Watson, head of financial planning and advisory services, Rathbone Investment Management
“Whether you are saving to get on the property ladder, pay down debt or fund your retirement, it’s important to remember to keep putting money away regularly towards your longer-term goals,” she adds.
With interest rates rising, this is not the time to over-borrow and mortgage rates could start increasing from today’s record lows.
If spending on credit this Christmas, draw up a plan to repay it, credit reference agency Experian’s consumer affairs executive John Webb says. “Make sure you can afford the monthly repayments and repay the full balance within a specific time.”
Missing a single monthly payment could damage your credit rating, making it harder or more expensive to borrow money in future.
“Credit cards and overdrafts can have high interest rates, so paying the minimum every month can be costly,” Mr Webb says.
Try not to borrow close to your card’s credit limit, he adds. “If you use more than 90 per cent of your available credit, this will hit your credit score. Try to keep your balance below 30 per cent of your credit limit.”
Once you have your debts in hand, make sure you have a cash reserve to cover six to nine months of basic living costs, in case disaster strikes in 2022.
Given how 2021 has panned out, anything could happen in the next 12 months.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
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