2021 Scorecard

2021 was a year of resilience and recovery. Despite the volatility caused by record cases of COVID, mutating variants, high inflation, and threats of interest rate hikes, markets remained strong. With the arrival of COVID vaccines, easing restrictions, and reopening of economies, the global economy recovered rapidly. The massive fiscal stimulus and ultra-accommodative monetary worldwide sent stocks and other risk assets soaring in 2021.

Stocks

US stocks led the global stock market rally after record-breaking earnings from the big tech companies. As a result, the S&P 500 index ended the year with a 26.9 percent gain. The S&P 500 made 70 record highs in 2021, the second-most of any year in history (1995 had 77). Meanwhile, Japan’s Nikkei was the worst-performing major market. With the yen declining more than 10 percent against the US dollar last year, the Nikkei posted a -5.9 percent return in US dollar terms.

Vietnam’s VN Index led Asia with a 37.6 percent return in US dollar terms. Vietnam’s economy grew by 2.9 percent in 2020, one of a few economies expanding amid the COVID pandemic. On the other hand, Hong Kong’s Hang Seng was the worst-performer in the region with a -14.6 percent drop amid China’s widespread regulatory crackdown. Philippines was basically flat, down -0.2 percent for the year in peso terms and -5.9 percent in US dollar terms.

Commodities

Energy commodities saw their biggest annual gain since 2009. WTI crude oil surged 55 percent, while natural gas rose 47 percent on supply concerns, soaring demand, and an energy crisis in Europe.

Industrial metals had another banner year as global demand recovered. Tin, mainly used as a soldering agent for semiconductor chips, electronics, solar panels, and appliances, soared 91 percent for the year. This is the biggest annual rise for tin on record. Meanwhile, precious metals ended the year lower, with palladium languishing at the bottom with a -22 percent decline.

Among soft commodities, coffee was the clear winner. It gained 76.3 percent last year to record a 10-year high. Orange juice was the worst performer but was up 11.5 percent.

Currencies & Cryptos

The US dollar index ended 2021with a 6.4 percent gain, registering its best year since 2015. An improving US economy and a hawkish Fed have supported the US dollar. The Fed is expected to increase interest rates as early as March, well ahead of most other major economies.

The best-performing major currency was the Canadian dollar which gained 0.61 percent in 2021. Conversely, the Japanese yen, which weakened -10.3 percent, was the worst. Among Asian EM currencies, the Chinese yuan was the best, with a 2.41 percent appreciation. Most Asian currencies ended the year in red, with the worst being the Thai baht, down -10 percent. Meanwhile, the Philippine peso weakened 5.7 percent.

Cryptos had another big year in 2021. Despite the sharp selloff the past two months, Bitcoin ended the year up 60 percent, while Ethereum rose 400 percent.

China stocks’ biggest one-day surge

Chinese companies publicly traded in the US posted their biggest one-day surge since 2008. After plunging 61 percent from its all-time high, the Nasdaq Golden Dragon China Index (HXC) rallied 9.4 percent on Thursday. JP Morgan and Goldman Sachs are now betting that China stocks will perform better in 2022, saying that most of the headwinds the country is facing are now priced in. The recovery in the bombed-out Chinese stocks may help emerging markets recover, including Asia and the Philippine stock market.

We wish our readers a better, peaceful, and prosperous New Year!

Philequity Management is the fund manager of the leading mutual funds in the Philippines. Visit www.philequity.net to learn more about Philequity’s managed funds or to view previous articles. For inquiries or to send feedback, please call (02) 8250-8700 or email [email protected].