Winners And Losers Of The 2021 Market Rollercoaster
Summary
- So-called “safe” assets had a rougher time. Government and investment-grade corporate bonds and gold generally ended the year flat or lower.
- The hands-down winners of the 2021 reopening race were equity markets in northern Europe (led by the Netherlands and Sweden, up 38.4% and 34.2%, respectively), Canada (up 28.6%) and US stocks (led by the Russell 1000).
- Technology, which makes up 31% of the Russell 1000 vs 14% for the non-US index, single-handedly accounted for 11.8 percentage points (or 45%) of the large-cap index’s total returns, dwarfing the industry’s contributions in other developed markets.
stevecoleimages/E+ via Getty Images
By Mark Barnes, PhD, head of investment research (Americas), and Christine Haggerty, research & analytics
It was a banner year for risk assets. Despite the relentless pandemic overhang and several risk-off stumbles, most equity markets tallied double-digit gains in 2021, and cyclically sensitive stocks strongly outpaced more economically defensive ones. Oil and other commodity prices surged. High-yield credit posted decent mid-single-digit gains in the US and Eurozone.
So-called “safe” assets had a rougher time. Government and investment-grade corporate bonds and gold generally ended the year flat or lower.
But there were some notable quirks in this tilt to risk. Large-cap stocks generally outperformed their more erratic smaller-cap peers, particularly in the US. Stocks and high-yield bonds in emerging markets significantly underperformed. And, the US dollar soared versus most of its developed and emerging-market counterparts, in contrast to its traditional role as the go-to haven currency.
Regional asset class total returns – Q4 and full year 2021 (local currency %)
Source: FTSE Russell. Data as of December 31, 2021. Past performance is no guarantee to future results. Please see the end for important disclosures.
US and European stocks barreled ahead
The hands-down winners of the 2021 reopening race were equity markets in northern Europe (led by the Netherlands and Sweden, up 38.4% and 34.2%, respectively), Canada (up 28.6%) and US stocks (led by the Russell 1000). The latter index amassed a whopping 11-point lead over non-US stocks in 2021, while stocks elsewhere trailed non-local peers, particularly in Asia Pacific ex Japan and emerging markets.
Regional index returns relative to FTSE All-World ex local market (rebased, TR, LC)
Source: FTSE Russell. Data through December 31, 2021. Past performance is no guarantee of future results. Please see the end for important legal disclosures.
The Russell 1000’s global leadership in 2021 was largely an upshot of its outsized exposure to leviathan tech stocks, which outperformed (rising 31% globally) as investors continued to gravitate to companies with reliable growth fundamentals, particularly as the global economic outlook grew hazier later in the year. The prevailing low-rate environment also benefited growth stocks, as low or falling yields enhance their future discounted cash flows.
Technology, which makes up 31% of the Russell 1000 vs 14% for the non-US index, single-handedly accounted for 11.8 percentage points (or 45%) of the large-cap index’s total returns, dwarfing the industry’s contributions in other developed markets.
Regional technology industry contributions to FY 2021 total returns (%)
Source: FTSE Russell. Data as of December 31, 2021. Past performance is no guarantee of future results. Please see the end for important legal disclosures.
As the time series below illustrates, the outperformance of large-cap technology and consumer discretionary industry groups has been a steadfast driver of Russell 1000 performance edge this year, with Big Auto and retailers lending a helping hand to tech hardware and software stocks over the past several months.
Select Russell 1000 sector returns relative to FTSE All-World ex USA sectors (rebased, TR, LC)
Source: FTSE Russell. Based on Industry Classification Benchmark (ICB) data through December 31, 2021. Past performance is no guarantee of future results. Please see the end for important legal disclosures.
US large caps trounced small caps in 2021
Many of the same sector exposures also fueled the Russell 1000’s outsized lead over its small-cap counterpart last year. Once again, contributions from mega-cap tech hardware and software stocks explain the lion’s share of the difference. Big Auto also helped. But another major boost came from Big Pharma and medical equipment suppliers, which ranked among the Russell 2000's worst performers.
Top 10 sector-weighted contributors to returns ‒ FY 2021 (TR %)
Source: FTSE Russell. Data based on Industry Classification Benchmark (ICB) data through December 31, 2021. Past performance is no guarantee of future results. Please see the end for important legal disclosures.
© 2021 London Stock Exchange Group plc and its applicable group undertakings (the “LSE Group”). The LSE Group includes (1) FTSE International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE Global Debt Capital Markets Inc. and FTSE Global Debt Capital Markets Limited (together, “FTSE Canada”), (4) MTSNext Limited (“MTSNext”), (5) Mergent, Inc. (“Mergent”), (6) FTSE Fixed Income LLC (“FTSE FI”), (7) The Yield Book Inc (“YB”) and (8) Beyond Ratings S.A.S. (“BR”). All rights reserved.
FTSE Russell® is a trading name of FTSE, Russell, FTSE Canada, MTSNext, Mergent, FTSE FI, YB and BR. “FTSE®”, “Russell®”, “FTSE Russell®”, “MTS®”, “FTSE4Good®”, “ICB®”, “Mergent®”, “The Yield Book®”, “Beyond Ratings®” and all other trademarks and service marks used herein (whether registered or unregistered) are trademarks and/or service marks owned or licensed by the applicable member of the LSE Group or their respective licensors and are owned, or used under licence, by FTSE, Russell, MTSNext, FTSE Canada, Mergent, FTSE FI, YB or BR. FTSE International Limited is authorised and regulated by the Financial Conduct Authority as a benchmark administrator.
All information is provided for information purposes only. All information and data contained in this publication is obtained by the LSE Group, from sources believed by it to be accurate and reliable. Because of the possibility of human and mechanical error as well as other factors, however, such information and data is provided "as is" without warranty of any kind. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the accuracy, timeliness, completeness, merchantability of any information or of results to be obtained from the use of FTSE Russell products, including but not limited to indexes, data and analytics, or the fitness or suitability of the FTSE Russell products for any particular purpose to which they might be put. Any representation of historical data accessible through FTSE Russell products is provided for information purposes only and is not a reliable indicator of future performance.
No responsibility or liability can be accepted by any member of the LSE Group nor their respective directors, officers, employees, partners or licensors for (a) any loss or damage in whole or in part caused by, resulting from, or relating to any error (negligent or otherwise) or other circumstance involved in procuring, collecting, compiling, interpreting, analysing, editing, transcribing, transmitting, communicating or delivering any such information or data or from use of this document or links to this document or (b) any direct, indirect, special, consequential or incidental damages whatsoever, even if any member of the LSE Group is advised in advance of the possibility of such damages, resulting from the use of, or inability to use, such information.
No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing contained in this document or accessible through FTSE Russell Indexes, including statistical data and industry reports, should be taken as constituting financial or investment advice or a financial promotion.
Past performance is no guarantee of future results. Charts and graphs are provided for illustrative purposes only. Index returns shown may not represent the results of the actual trading of investable assets. Certain returns shown may reflect back-tested performance. All performance presented prior to the index inception date is back-tested performance. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index was officially launched. However, back- tested data may reflect the application of the index methodology with the benefit of hindsight, and the historic calculations of an index may change from month to month based on revisions to the underlying economic data used in the calculation of the index.
This publication may contain forward-looking assessments. These are based upon a number of assumptions concerning future conditions that ultimately may prove to be inaccurate. Such forward-looking assessments are subject to risks and uncertainties and may be affected by various factors that may cause actual results to differ materially. No member of the LSE Group nor their licensors assume any duty to and do not undertake to update forward-looking assessments.
No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the applicable member of the LSE Group. Use and distribution of the LSE Group data requires a licence from FTSE, Russell, FTSE Canada, MTSNext, Mergent, FTSE FI, YB and/or their respective licensors.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
This article was written by
Recommended For You
Comments (2)
