New investment trends rip through the markets every year, and it’s often hard to predict ahead of time where money will flow. While it’s generally best for long-term investors to stick to consistent, regular investing, it can be fun and profitable to jump into high-momentum sectors of the market if you’re nimble and can handle the risk. In 2021, a number of strong investment themes emerged at different times throughout the year. Here’s a look at some of the market-moving themes that generated headlines in 2021 and may or may not continue into 2022.
Meme stocks were one of the biggest boom-and-bust segments of the market throughout 2021. Meme stocks are in large part a product of the rise of social media and online message boards. Investors can now communicate investment themes and strategies instantaneously across the entire world. In 2021, groups of online investors focused their attention on stocks with large short positions. By piling into these stocks and driving the share prices higher, these groups of investors can trigger a short squeeze, driving the share price up even higher. This can create extraordinary stock price movements, as epitomized by stocks like AMC Entertainment and GameStop in 2021. As of Dec. 3, 2021, those stocks are up 1,268% and 815%, respectively. GameStop was up an incredible 400% in a single week in January 2021.
If there was a competitor with meme stocks for headline space in 2021, it was cryptocurrency. As the first, largest and most well-known crypto, Bitcoin garnered a lot of the attention in 2021, especially as it shot up from below $30,000 in the summer to nearly $69,000 in November. But that was small peanuts compared to some of the runs in other cryptos. Shiba Inu, for example, was up an unfathomable 49.15 million percent year-to-date as of Dec. 4, 2021. And that’s after a significant correction of over 50% from its high set just in October. With major news events like the IPO of the largest cryptocurrency trading platform, Coinbase, to the acceptance of Bitcoin as legal tender by El Salvador, cryptocurrency seems to be only gaining momentum.
Reopening Plays/Stay-at-Home Plays
The uncertainty surrounding the coronavirus and its variants resulted in two different groups of stocks rising and falling throughout the year. At first, so-called “stay-at-home” stocks rallied sharply, as the initial reaction to the pandemic was to shutter businesses and enforce stay-at-home orders. Stocks of companies like streaming services, food delivery businesses and videoconference providers enjoyed major gains during the early days of the pandemic. Later on, so-called “reopening plays,” such as live entertainment providers, travel companies and restaurants, were in vogue as vaccine distribution spread and case counts fell. As the long-term outcome of the coronavirus pandemic is yet to be determined, either group could rise or fall in favor depending on the latest COVID-19 news.
Non-fungible tokens, or NFTs, were absolutely on fire in 2021. Even with NFTs being in the news throughout the year, many investors still don’t fully understand them. In short, an NFT is a unique, digital asset tied to the blockchain that can be bought or sold but not replicated. For example, the NFT of Jack Dorsey’s first tweet sold for $2.9 million, and a collage of digital images by the artist Beeple sold for an unbelievable $69.3 million, at no less than prestigious auction house Christie’s. Although not all investors might be on the NFT bandwagon yet, their numbers are growing exponentially. In 2021’s third quarter, NFT transaction volume increased by 704% over the prior quarter alone. As NFTs become more discussed and understood by the general public, their popularity is likely to continue to grow.
The housing market, which is traditionally a relatively staid, slow-growing market, took off in 2021. In the second quarter, the median price of a home was up 22.9% over the prior year, followed by gains of 16% in 2021’s third quarter. All-in-all, the typical price of a single-family home was up over $50,000 from the prior year, with double-digit percentage increases seen in a whopping 78% of surveyed markets. Record-low mortgage rates, the rise in remote workers and a glut of stimulus money were all significant contributors to the booming housing market of 2021. Stock market investors played the boom via home improvement stocks like Lowe’s and Home Depot, up 55% and 53%, respectively, and via home builders like Toll Brothers, up 57% YTD as of Dec. 4, 2021.
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