Global stock markets record double-digit gains for the third consecutive year

Global stock markets recorded double-digit gains at the close of 2021 for the third consecutive year, as loose monetary policy and a large number of fiscal stimulus measures helped promote economic recovery. Pandemic.

The FTSE Global Equity Index in U.S. dollars rose 16.7% in 2021, surpassing the 14.1% in the previous year, but it underperformed the staggering increase in 2019 (the year before the coronavirus crisis).

Entering 2021, investors are optimistic about the coming year. With the introduction of vaccines, pent-up demand is expected to lead to economic recovery.

Supported by the re-emergence of government stimulus plans and the most restrictive measures implemented to curb Covid-19 infection, the support policies of many of the world’s largest central banks have helped push up financial markets.

The prospect of the Central Bank withdrawing support for financial markets during the crisis and the increase in Covid-19 cases due to the rapid spread of Omicron variants may change the fortunes of investors before the end of the year. However, despite limiting runaway gains, the stock market failed to prevent the rebound.

The global index rose nearly 1% from its peak in September to December 31.

“This is incredible,” said Christina Hooper, Invesco’s chief global market strategist. “Monetary policy, fiscal stimulus and the launch of vaccines have always been powerful engines for the stock market.”

Favorable conditions help corporate profits to recover from the economic activity losses caused by the 2020 pandemic.

Because economic demand exceeds supply, companies are largely able to pass on the sharp rise in prices so that they can benefit from the reopening of the global economy.

In the United States, once the fourth quarter report is released, year-on-year earnings growth is expected to reach 45%, which is the highest level on record. Data from FactSet Back to 2008.

Jim Paulsen, chief investment strategist at Leuthold Group, said: “All imaginable good things have shortages, uncontrolled inflation, political conflicts, race and class wars, but there are also some of the best corporate gains in history.” “This is strange. But in the face of such a recovery, it is difficult to let the stock market fall.”

The rise in global stock markets has been particularly pronounced in the United States. Wall Street’s blue chip S&P 500 index has risen by nearly 27% this year, of which energy stocks have risen by nearly 50% driven by soaring oil prices, and then real estate stocks have risen by more than 40%.

Devon Energy ranked first in the index with an increase of nearly 190%. A total of 11 companies have at least doubled their share prices, including Ford Motor, Moderna and Marathon Petroleum.

This marks the transformation of the previous two years. The technology industry will still grow by 33% in 2021, dragging the market higher. Cathie Wood’s Ark Innovation exchange-traded fund has fallen by more than 23% this year. Compared with the rapid rise of 150% in 2020, the fortunes have undergone a sharp reversal. The fund has bet on some of the best-performing technology companies during the pandemic.

Despite this, the largest technology stocks are still the largest contributors to the rise of the S&P 500. Because of the way the index is weighted, their relative size to other companies makes their relatively small share price rises more influential.

The top six in the S&P 500 index are all large technology companies, led by Microsoft and Apple, which are the two largest companies in the world by market capitalization. The values ​​of these behemoths are US$2.5 trillion and US$2.9 trillion, respectively, which have risen by 51% and nearly 34% respectively in the past year.

Technology stocks also continued to push markets across the Atlantic higher, causing the pan-European Stoxx 600 index to rise 22%. This marks the index’s second best performance since 2009, slightly lower than the 23% increase in 2019.

In Asia, the Japanese stock market has also performed strongly this year, with the Topix Index rising 10.4%, compared with a gain of less than 5% in 2020.

However, in stark contrast to the strong rise in developed markets, Hong Kong’s Hang Seng Index fell by more than 14%, which was hit by Beijing’s regulatory authorities, especially the education and technology industries. China’s Shanghai and Shenzhen 300 Index fell more than 5%.

This decline caused the broader MSCI Emerging Markets Index to fall by 5.3% in U.S. dollars. Similar MSCI indexes excluding Chinese stocks rose by more than 9%.

The line chart of percentage change in local currency shows that U.S. stocks will rise in 2021, while Hong Kong will lag behind

Entering 2022, investors are still cautiously optimistic about the potential for the stock market to continue to rise.

Concerned about the impact of the new pressure on the supply chain, commodity costs, and company performance, Covid-19 cases continue to surge globally.Dazzling stock market fluctuation How did confidence stand out after the emergence of Omicron variants Can be shaken Twists and turns by an unexpected pandemic.

At the same time, the tightening monetary policy has brought another potential disadvantage for the coming year.

U.S. Federal Reserve Officer Expected to raise interest rates 3 times in 2022, As the central bank takes measures to curb inflationary pressures. The Fed also outlined a plan in December to double its exit from the $120 billion monthly bond purchase program during the pandemic.

Nonetheless, some investors say that the rapid rise in stock prices compared to other asset classes means they will remain attractive in the new year. Although a little nervous.

“I think there will be a correction in the stock market by the end of the first quarter. It is not necessarily a continuous correction, but it is still a correction,” said Andrew Brenner, head of international fixed income at National Alliance Securities. “But nothing can stop the stock market from rising in the first half of this year.”

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