The Biggest Takeaways for Investors in 2021

In today’s Money Morning…a whirlwind of drama…market miasmas… another breakout year for bitcoin…and more…

It still hasn’t really struck me that Christmas is in just two days.

This year, even more so than 2020, has felt like a whirlwind of drama — driven largely by the still overbearing pandemic and society’s response to it.

But, with 2021 quickly coming to a close, it seems only natural to do some reflecting.

Not just on the big news events, but also the trends that defined markets. Because if there is one thing to be sure of, it is that shareholders certainly didn’t have a dull year…

So let’s start by talking once more about the elephant in the room: central bankers.

Market miasmas

Without a doubt, the biggest story of 2021 has to be the return of inflation — an indicator that many young investors may not be able to appreciate as much as their experienced counterparts.

The last time we saw prices rising this quickly was in the lead up to the GFC. And while Australia fared better than most in that economic crash, it still wiped out a lot of value across the ASX.

So, with inflation ramping up over the latter half of the year, it is no wonder that markets are nervous, particularly when central bankers — who have been so dismissive of this inflation threat — are only starting to address the issue now.

We’ll only truly know if it is too little, too late come 2022.

Hopefully, though, things won’t get too ugly.

The other half of the central banking issue that I want to mention is stimulus. Because while it certainly had more of an impact in the first half of the year, colossal stimulus is a big reason for why we’re even talking about inflation.

In short, central banks have pumped billions into markets this year. Liquidity that has created a phenomenon in markets where fundamentals are no longer relevant.

All investors seemingly care about is growth potential — bidding up tech stocks and other long-term disruptors to insane valuations.

As for whether or not it is all one big bubble, again, we’ll have to wait and see what 2022 brings.

But I personally wouldn’t be surprised if this is — to borrow a pandemic buzz word — the new normal.

There is simply too much capital floating around the world now. All of which needs some sort of yield. And with bonds still languishing, stocks seem to be the answer.

That is, of course, unless you’re a crypto believer…

Another breakout year for bitcoin

Yes, while we’ve already discussed this topic plenty of times this year, it is one that we can’t afford to ignore.

Bitcoin [BTC], and crypto at large, had yet another incredible year. One that saw bitcoin reach the US$1 trillion market value mark for the first time — making it the fastest asset in history to do so.

And while, technically, it has since gyrated above and below that threshold since earlier in the year, the appeal of crypto has only grown. Making 2021 a year to remember for the crypto community, much like 2017 was before it.

As for whether that means we could begin to see another crypto winter like that of 2018 and 2019, no one knows. It certainly wouldn’t surprise long-time followers, though, I know that.

One of the more recent trends within the realm of crypto and blockchain is non-fungible tokens or NFTs.

Now, if you’ve been following crypto for a while, you’ll know NFTs are hardly new. Back in the last crypto boom cycle of 2017, we saw the emergence of CryptoKitties — a series of NFT cat collectibles that became a short-lived fad.

Having said that, a lot of people made a lot of money from these silly digital cats.

Instead of felines, though, it appears the latest trend is apes. A collection of varied cartoon monkeys, known as ‘Bored Ape Yacht Club’, has become the face of the new wave of NFTs.

And if you’re unfamiliar with the appeal of these Bored Apes, well, all I’ll say is that one of them sold for US$1.42 million last week…

For that reason, many are dismissing NFTs as a whole as some larger joke or money laundering scheme. And while I certainly don’t see Bored Apes becoming a lasting project in the crypto world, it is a blueprint for what may come.

But, I’ll have more to say on that tomorrow when we take a look at what 2022 may have to offer.

Until then, hopefully we can put the worst of this year behind us as we look to a more positive future.

Regards,

Ryan Clarkson-Ledward,
Editor, Money Morning

Ryan is also the Editor of Australian Small-Cap Investigator, a stock tipping newsletter that hunts down promising small-cap stocks. For information on how to subscribe and see what Ryan’s telling subscribers right now, click here.