Looking for longer-term market trends that might shape the next few years
Let’s be honest for a second: the DJIA, the S&P 500, NASDAQ and the Russell 2000 all delivered one of the most surprising years in recent history. And while many are happy to see 2021 in the rear-view mirror, the 2021 performance for the major U.S. indices was nothing short of impressive, especially given the headwinds of COVID-19.
Who could have predicted that:
- The DJIA would rise 18.7%;
- The S&P 500 would rise 26.9%;
- NASDAQ would rise 21.4%; and
- The Russell 2000 Index would rise 13.7%?
As we enter 2022, there will be no shortage of talking-heads trying to scare investors that we might be in a stock market bubble. And they might be right.
But the flip-side is that there are just as many talking-heads suggesting that stock markets still have plenty of room to grow, and that this time it really is different. The reality is that it’s a topic that divides some of the brightest minds in finance.
So, rather than jump down that rabbit hole, let’s instead listen to what the stock markets are telling us. Are trends developing that might shape the next few years? Has COVID-19 forever shifted the landscape of some industries at the expense of others?
Maybe 2021’s 5 best- and worst-performing stocks from the DJIA and S&P 500 (and the best performer from the S&P 400 Mid Cap Index) can inform?
Best/Worst 2021 Stocks in the DJIA
Within the 30-stock DJIA, 2021 saw 25 record positive performance and the gap between the best and the worst performer was wide.
Company | 2020 Total Return |
Home Depot | +59.5% |
Microsoft Corporation | +52.5% |
Goldman Sachs Group | +47.6% |
Chevron Corp. | +46.3% |
Cisco Systems | +45.8% |
Honeywell International | -0.3% |
Visa Inc. Class A | -0.3% |
Boeing Co. | -6.0% |
Verizon Communications | -7.5% |
Walt Disney | -14.5% |
Best/Worst 2021 Stocks in the S&P 500
The S&P 500 is weighted by market capitalization and the five largest companies – Apple, Microsoft, Amazon, Alphabet (Google) and Tesla – make up 23% of the Index as of December 31st. That being said, the gains for S&P 500 companies were plentiful in 2021, with 88% of companies in the S&P 500 ending the year in positive territory.
Among the top 20 best-performers in the S&P 500, the top 2 and 6 of the top 20 were oil producers and that in itself speaks volumes. And last year’s top stock Tesla was “only” up 49.8% this year – a far cry from 2020’s eye-popping 743% return.
But as the table below demonstrates, the gap between the best and the worst performers in the S&P 500 was obscenely wide. Some might argue that the gap defies logic altogether.
Company | 2021 Total Return |
Devon Energy Corp. | 196.1% |
Marathon Oil Corp. | 149.7% |
Moderna Inc. | 143.1% |
Fortinet | 142.0% |
Signature Bank | 141.5% |
MarketAxess | -26.9% |
Activision Blizzard | -28.0% |
Las Vegas Sands | -36.6% |
Global Payments | -36.9% |
Penn National Gaming | -42.9% |
Source for tables: Yahoo Finance
One More Crazy Stock Story
Remember the GameStop craziness to start the year? Here’s a refresher: from January 1st through January 27th, shares of GameStop were up 1,744.5%. Then the stock took a dive.
But for those who held on all year, GameStop shares were up 687.6% for 2021, on its way to becoming the top performer among companies in the S&P 400 Mid Cap Index. Kind of crazy.
So, What Should You Do Now?
The answer to that question is, of course, very personal. And depending on your perspective, your course of action will be personal too. But as your financial planners, we would encourage you to think beyond just investing.
Think about things like:
- Is your house equipped for you to work from home long-term?
- Do you have enough cash-reserves in case of an emergency?
- Are your estate planning documents (will, power of attorney, health-care directive, etc.) updated?
- Do you have adequate insurance that covers your risks?
Finally, if you are thinking of altering your asset allocations due to what you think might be longer-term trends, let’s discuss.