Marc Jones and Saqib Islam Ahmed

LONDON/NEW YORK – The second year of COVID has proved to be just as devastating for global financial markets as the first.

While the stocks bulls are still in control, surging food and energy prices have turbo-charged inflation. This has impacted bond markets and rattled bonds. China’s heavyweight tech and real estate sectors have seen $1 trillion losses.

Turkey’s exit from 2021 is a disaster for its currency. Bitcoin and cryptocurrency have ruined it. Small-time traders have given some hedge funds a beating. Green has become mainstream but dirty oil and gas are the major winners. They have risen more than 40% to 50%.

1STOCKS UNTIL YOU DROP

MSCI’s 50-country global index has added another $10 trillion or 13% to its value, thanks to COVID signs of recovery and the continued flood of central banks stimulus.

However, there have been stark differences. Wall Street is now up 23%, however roughly 65% of Nasdaq’s gains (3.780 stocks) can be attributed to five stocks: Microsoft (NASDAQ), Google (NASDAQ), Apple (NASDAQ), Nvidia [NASDAQ:]) and Tesla (NASDAQ) according to Bank of America’s number crunchers.

European banks had their strongest year for over a decade, with a 33% increase, but emerging market equity have suffered a terrible 7% drop, mainly due to a 30% fall in Hong Kong-listed Chinese tech, which was affected by Beijing’s attempts to restrict their influence.

Tommy Garvey of Asset Manager GMO’s asset allocation team said that U.S. equity valuations are “absolutely bonkers”. He also stated that other regions of the globe have expensive valuations. (Graphic: World stocks have seen $10 trillion surge in value in 2021, https://fingfx.thomsonreuters.com/gfx/mkt/mypmnaejdvr/Pasted%20image%201640093340625.png)

2.OIL TAKES THE POILS

The world’s most resource-hungry and wealthy countries have attempted to bring back some normalcy, but commodity markets have suffered. Respective gains of 40% to 50% for oil are the best they have seen in five years, and prices remain well above their pre-pandemic peak.

The key industrial metal cooper saw a record-breaking April high and has increased nearly 25% in the past two years. Zinc saw a similar increase, and aluminium experienced a 40% gain in the best year since 2009.

While precious metal gold may have fallen, the agri-markets are thriving with corn up by 25% and sugar up by 20%. Coffee is up 67%. (Graphic: Oil, gold, bitcoin, coffee and stocks, https://fingfx.thomsonreuters.com/gfx/mkt/dwpkrzwmnvm/Pasted%20image%201640120980934.png)

3 BEARS IN CHINA SHOP

China’s clampdown on big online companies and a crisis in the property sector have combined to wipe out over one trillion dollars from its markets.

Alibaba China’s Amazon has dropped nearly 50% (NASDAQ:) While the U.S.-listed Chinese stock market index is at 40%, Evergrande, a homebuilder has experienced its largest-ever default.

This has caused a tsunami to the Chinese high-yield, or “junk” bond market. It has experienced a 30% drop in value. 67% of the main ICE Chinese high-yield index are held by property companies’ bonds.

AXA Investment Managers’ Head for Active Emerging Markets Fixed income Sailesh Lam warned that “if home sales drop at the current pace, it could be easy to shave another 11% of (Chinese] GDP.” (Graphic: Chinese stocks battered by Beijing clampdown, https://fingfx.thomsonreuters.com/gfx/mkt/gkvlgloqmpb/Pasted%20image%201640102441723.png)

4/BONDS: NO TIME FOR BUY

It has been a challenging year for the bond market due to high inflation and central banks turning off their money taps.

U.S. Treasuries, the benchmark global for investors in government debt, are expected to suffer a loss of 2%. This is their first negative result since 2013. The euro’s drop of 8% this year has meant that German Bunds have suffered a more than 9% dollar-terms decline.

The positive aspect is that the highest risk group of corporate “junk” bonds, those with a rating CCC or below, have made approximately 10% both in Europe and the U.S.

The U.S. has seen a strong performance in inflation-linked bonds. TIPs returning 5%, euro-denominated equivalents earning 7% and British linkers making 6%.. (Graphic: Negative returns for most major bond markets in 2021, https://fingfx.thomsonreuters.com/gfx/mkt/myvmnalbapr/returnsdec21.PNG)

5./MEME MADNESS

The retail trader took over Wall Street this year in large numbers, creating eye-popping trading volumes and record-breaking moves in the so called’meme stocks’.

GameStop shares (NYSE:), rose by nearly 2,500% during January. But, after regaining a large portion of those gains, they will close the year at 730%. AMC Entertainment, another popular meme site, has a steady increase of about 1,350% over the past year. However, it was higher by as high as 3,200% at early June.

Tesla, the leader in electric car manufacturing, was able to recover from early-year losses. But other funds or stocks linked to innovation – such as the ARK Innovation Fund and some solar energy stocks, BioTech shares and special purpose acquisition companies or SPACs – are down 20% to 30%. (Graphic: Meme madness, https://fingfx.thomsonreuters.com/gfx/mkt/mopanqrlava/Pasted%20image%201639710413899.png)

6. TURKISH TAKES A BATH

Slumps in Turkish Lira are not uncommon these days. However, this year’s collapse was remarkable even for its standard.

When President Tayyip Turkey, self-declared enemy to interest rates and a central bank governor, took office in March, things started to get ugly. However, things have gotten more difficult since Erdogan’s new chief of the bank began to reduce rates in September.

While there was a slight bounce in this week’s currency, it is down more than 40% year-to-date. (Graphic: Turkey’s turbulent 2021, https://fingfx.thomsonreuters.com/gfx/mkt/lbpgnlaywvq/Pasted%20image%201640105944633.png)

7/INFLATION PALPITATIONS

Inflation rose to the forefront of investors’ concerns in 2021, as the pandemic disrupted global supply chains and made it more difficult for everyone to keep up with demand.

The Federal Reserve declared this month that it would end pandemic-era bonds purchases earlier than expected. This was in response to U.S. inflation at its highest level since 1980s. Also, the Bank of England became G7’s first central bank to raise interest rates after the COVID epidemic.

The next year will see the addition of other major central banks, although some emerging markets are well-advanced in this area. (Graphic: Global inflation surged in 2021, https://fingfx.thomsonreuters.com/gfx/mkt/gdvzymojdpw/Pasted%20image%201640103430004.png)

8.8/SUBMERGING MATERIALS

Investors were optimistic about emerging markets heading into 2018, but the reality has been almost the complete opposite. EM stocks lost 7% because of China’s problems and COVID persistance. That is compared to a 13% gain in the world index, and a 23% leap on Wall Street.

Losing 9.7%, local currency EM government bonds also suffered. Although dollar-denominated bonds performed better in oil producing countries, J.P. Morgan’s EM currencies Index has lost almost 10%.

Jeff Grills (NYSE: Asset Management) said that China was “the big story of the year”. He also stated that the next year would be about how fast and far rates increase and whether growth continues. (Graphic: Global FX in 2021, https://fingfx.thomsonreuters.com/gfx/mkt/znvnexrnzpl/Pasted%20image%201640096961775.png)

9/CRYPTO RUSHES IT

Nearly $70,000, “memecoins”, worth billions of USD; blockbuster Wall Street listings and an aggressive Chinese crackdown: 2021 was one of the most wildest cryptocurrencies ever. Even by its freewheeling standards.

While Bitcoin’s nearly 70% rise may not seem significant compared with last year’s 300% increase, this has happened despite a Chinese crackdown which saw its price almost double in May.

The digital token ‘” was launched as a joke in bitcoin in 2013. It soared more than 12,000% since the beginning of 2013 to an all time high in May, before plummeting nearly 80% in mid-December.

NFTs, strings of code that are stored on blockchain and represent unique ownership for digital art, videos, or tweets, have also been a big hit. In May, a digital collage created by Beeple in the United States sold for almost $70 million. This made it one of three highest-priced pieces ever sold by an artist living today at Christie’s. (Graphic: Peaks and troughs: Bitcoin’s 2021 rollercoaster, https://graphics.reuters.com/FINANCE-YEARENDER/zjpqkyzaepx/chart_eikon.jpg)

10/GREENDREAM

This year, the dream of going green is still front-and-center. Nearly half a billion dollars is expected to be issued in green bonds this year. This will make it another record-setting year. While the MSCI flagship global stocks index, the ‘ESG’ version is more than 22% higher than its standard counterpart, China’s most environmentally-friendly stocks index has risen more than 40% despite other sector’s woes.