2021/12/29
If you had been told about these events at the beginning of the year, you would not have believed that they could really happen in 2021 - or at least you would have been very surprised
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The year 2021 as a whole turned out to be positive for investment. The S&P 500 index has grown by almost 30% since the beginning of the year. Even more could be earned on individual stocks.
However, some events have turned the markets in 2021 into an unpredictable roller coaster for investors. Here are five of the most important and unexpected events that no analyst could have predicted.
In December, gas prices in Europe updated historical highs — the cost of 1 thousand cubic meters for the first time exceeded $ 2000. The price of the January gas futures on the index of the most liquid European TTF hub in the Netherlands reached $2136 per 1 thousand cubic meters (€180.34 per MWh) at the end of trading on December 21. During the same day, the price rose to $2,220 (€187.47). Volatility in the market is very high — by December 28, the cost of 1 thousand cubic meters of gas decreased to $1200 per thousand cubic meters.
A combination of negative factors led to such a significant increase. On the one hand, last winter in Europe turned out to be cold, and the summer was hot, gas reserves were spent on heating and air conditioners. The new winter also did not turn out to be warm, and gas reserves in Europe remained at low levels. At the same time, electricity production from windmills in the North Sea is now at lows, and preventive maintenance is being carried out at nuclear power plants in France, Bloomberg writes.
On the other hand, the reason for the increase in gas prices was the reports that Yamal-Europe, one of Gazprom's main export gas pipelines, switched to reverse mode and supplies gas from Germany to Poland. In addition, it became known about problems with the certification of Gazprom's new Nord Stream-2 gas pipeline — the German Federal Grid Agency said that no decision on this issue would be made until July 2022.
At the same time, in the future, the price of gas may remain at the level of $ 2000 per 1 thousand cubic meters or even grow. "These exciting times will last a little longer and probably won't end until the end of winter," said Hans van Cleef, senior energy economist at ABN Amro.
In 2021, many stocks and funds grew, but some of the securities did it for no objective reason — they were dispersed by private investors.
So, the shares of the video game retailer GameStop in January soared from $20 to $483 in two weeks without any reason from the company. It turned out that users of the social platform Reddit from the thematic forum about investments are behind the explosive growth. The participants of the flash mob decided to start buying GameStop shares in order to "deprive greedy hedge funds of money." Then their activity spread to the shares of AMC Entertainment Holdings, Bed Bath & Beyond, Nokia and Blackberry.
At the center of the scandal was not only Reddit, but also the broker Robinhood. It was through him that many private investors participated in the dispersal of quotations. The company disappointed investors at the end of January, during the peak of the hype, the broker limited operations on the most volatile securities. Because of this, many private traders have lost money. Subsequently, one of the possible reasons for the failure of the IPO was called the revenge of investors with Reddit.
The situation has attracted the close attention of the authorities. The Anti-Fraud Department of the US Department of Justice and the San Francisco Prosecutor's Office conducted an investigation into the fact of high volatility in the market. Brokers, in particular Robinhood, and social networks, which have become central platforms for private investors, have been under investigation.
However, Robinhood and other brokerage companies won the lawsuit. The court did not find direct evidence in fueling the hype around the "meme" actions. A Securities and Exchange Commission (SEC) investigation The US has refuted the theory that a short-squeeze could lead to a rapid rise in GameStop shares. According to the SEC, the sharp rise was caused by a rapid increase in the number of investors who bought securities.
In November, inflation in the United States peaked — it has not been this high since 1982. According to the US Department of Labor, the consumer price index rose by 6.8% in November compared to last year.
The reason for this surge is directly related to the coronavirus. To support business, central banks around the world have chosen a soft monetary policy. This has become a good ground for accelerating inflation.
On the demand side, there were structural changes in consumption: services were bought less often, and durable goods more often. At the same time, household incomes in the United States increased due to direct cash payments from the government.
At the same time, coronavirus and quarantine forced many companies to stop production, and problems also arose in supply chains. This increased the costs of producers, and the growth of wholesale prices overtook consumer prices.
In this regard, investors are focused on the future decisions of the Fed. The regulator has already accelerated the curtailment of the economic stimulus program and began to reduce the purchase of bonds on the market by $ 30 billion per month instead of the planned $15 billion. Thus, the program will be completed by mid-March 2022.
At the same time, the Fed can raise the key rate at any time. Now it is at a near-zero level (0-0.25%).
In 2021, investments in China unexpectedly turned out to be one of the riskiest on the market. The value of securities of many companies has collapsed due to tighter regulation of the technology sector and criticism of some industries in the state media.
One of the sectors that suffered the most was online education. In July 2021, the Chinese authorities imposed restrictions on online platforms and companies providing tutoring services for the school curriculum.
Companies were ordered to become non-profit organizations, they were forbidden to enter IPOs and attract foreign capital.
In addition, educational companies can no longer conduct tutoring classes during public holidays, weekends and school holidays. After the announcement of the new rules, the shares of industry players — for example, New Oriental Education & Technology Group, TAL Education, Gaotu Techedu - fell by tens of percent.
Video games, manufacturers of semiconductors, electronic cigarettes, alcohol, baby food, biotech and IT companies have also been criticized by the Chinese authorities. Chinese companies in these sectors also lost a lot in value.
The authorities began to charge large companies with various violations and conduct investigations. For example, following the results of an antitrust investigation against Alibaba, the company was fined a record $2.8 billion. Beijing has tightened control over its activities and demanded to reorganize the fintech business.
Since the beginning of 2021, the dollar has more than doubled against the Turkish lira, from 7.43 lira in January to 18.4 by December 20. Thus, the lira became the worst currency in 2021 among the currencies of developing countries.
Most of the collapse occurred at the end of November - December. The reason was the actions of the Central Bank of Turkey, which lowered the key rate despite rising inflation. Back in September, the key rate in Turkey was equal to 19%, but by December 16 it had dropped to 14%, despite the annual inflation rate in October at 20%. This move contradicts economic theory, which claims that a looser monetary policy increases consumer prices. In the case of Turkey, economic growth may also suffer because foreign investors withdraw money against this background.
This approach is explained by the views of the president of the country — Recep Tayyip Erdogan opposes the growth of interest rates and claims that this will accelerate inflation, and not restrain its growth. According to Erdogan, the rate cut is necessary to stimulate economic growth, exports and lending in Turkey.
Erdogan also believes that such a monetary policy is supported by Islam, which prohibits usury as a way of making a profit. According to the President, Turkey can and should free itself from dependence on foreign capital flows.
The Turkish President has introduced measures to support the lira. For example, if the income on a deposit in the national currency becomes lower than at the current dollar exchange rate, then compensation will be paid to citizens. Against the background of the news, the lira rebounded to 10.23 lira per dollar and on December 27 is 11.6 lira per dollar.
Erdogan hopes that volatility will stop soon — and then everyone will see how inflation will begin to fall. According to his plan, the changes will be visible in a few months.
Michael Zippo
https://linkedin.com/in/michael-zippo-9136441b1
info@e-book.business
Sources: Bloomberg
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