Global Stock Markets Off to Worst Start in History [Chart]
The first four trading days show optimism for 2016 is in short supply.
The Chart of the Week is a weekly Visual Capitalist feature on Fridays.
In our review of the economic events of 2015, we noted that the simple turning of a calendar page does not rectify the problems of the previous year.
The first week of trading on major exchanges has made this even more clear.
China’s Rough Start
China kicked off the volatility this week with multiple devaluations of the yuan to reduce the strain on its foreign reserves, after burning through $120 billion in the month of December.
In reaction to this news, as well as the updated manufacturing data out of China at the beginning of the week, the Chinese stock market plunged to start 2016. The “blue chip” CSI 300 index fell 7% on Monday to trigger a market intervention mechanism that halted trading. On Thursday the problems continued when the market opened down 5% almost instantly, triggering the same mechanism to provide a 15 minute trading break. Markets re-opened, plunged again, and got halted for the rest of the day.
Here’s what that whole 29 minute session looked like on Thursday, including the 15 minute break:
This morning, the yuan was strengthened and it had a semi-calming effect. The CSI 300 finished up Friday’s trading in positive territory, but it is still down -9.9% for the first complete week of 2016.
The Spillover Effect
The whiplash from China’s tumultuous market was enough to put other global markets in a tizzy. This week’s Chart of the Week shows the first four days of trading on major world markets.
The S&P 500 and Dow Jones Industrial Average both opened 2016 with their worst four-day starts in history. The Nasdaq also was also down 6.4% in the first four days of trading, which took it into correction territory.
Canada’s TSX continued on its 19% decline since April 2015 and European markets have been hard-hit as well. Germany’s DAX was down 7.1% to start the year, and the FTSE 100 declined 4.8%.
Meanwhile, crude oil (WTI) is now $33, which is its lowest price in 14 years.
Yearly Starts Trending Worse
Another point we noted in the chart above is that the starts for the S&P 500 have been trending more towards negative territory each year since the Financial Crisis.
In recent times, it seems investors are starting each new year more anxious to pull the “sell” trigger. Proceed with caution in 2017.
How the Top Cryptocurrencies Performed in 2021
Cryptocurrencies had a breakout year in 2021, providing plenty of volatility and strong returns across crypto’s various sectors.
The Returns of Top Cryptocurrencies in 2021
2021 saw the crypto markets boom and mature, with different sectors flourishing and largely outperforming the market leader, bitcoin.
While bitcoin only managed to return 59.8% last year, the crypto sector’s total market cap grew by 187.5%, with many of the top coins offering four and even five-digit percentage returns.
2021 Crypto Market Roundup
Last year wasn’t just a breakout year for crypto in terms of returns, but also the growing infrastructure’s maturity and resulting decorrelation of individual crypto industries and coins.
Crypto’s infrastructure has developed significantly, and there are now many more onramps for people to buy altcoins that don’t require purchasing and using bitcoin in the process. As a result, many cryptocurrency prices were more dictated by the value and functionality of their protocol and applications rather than their correlation to bitcoin.
|Ethereum||Smart Contract Platform||399.2%|
|Binance Coin||Exchange Token||1,268.9%|
|Solana||Smart Contract Platform||11,177.8%|
|Cardano||Smart Contract Platform||621.3%|
|Terra||Smart Contract Platform||12,967.3%|
|Avalanche||Smart Contract Platform||3,334.8%|
|Polkadot||Smart Contract Platform||187.9%|
Sources: TradingView, Binance, Uniswap, FTX, Bittrex
Bitcoin wasn’t the only cryptocurrency that didn’t manage to reach triple-digit returns in 2021. Litecoin and Bitcoin Cash also provided meagre double-digit percentage returns, as payment-focused cryptocurrencies were largely ignored for projects with smart contract capabilities.
Other older projects like Stellar Lumens (109%) and XRP (278%) provided triple-digit returns, with Cardano (621%) being the best performer of the old guard despite not managing to ship its smart contract functionality last year.
The Rise of the Ethereum Competitors
Ethereum greatly outpaced bitcoin in 2021, returning 399.2% as the popularity boom of NFTs and creation of DeFi 2.0 protocols like Olympus (OHM) expanded possible use-cases.
But with the rise of network activity, a 50% increase in transfers in 2021, Ethereum gas fees surged. From minimums of $20 for a single transaction, to NFT mint prices starting around $40 and going into the hundreds on congested network days, crypto’s retail crowd migrated to other smart contract platforms with lower fees.
Alternative budding smart contract platforms like Solana (11,178%), Avalanche (3,335%), and Fantom (13,207%) all had 4-5 digit percentage returns, as these protocols built out their own decentralized finance ecosystems and NFT markets.
With Ethereum set to merge onto the beacon chain this year, which uses proof of stake instead of proof of work, we’ll see if 2022 brings lower gas fees and retail’s return to Ethereum if the merge is successful.
Dog Coins Meme their Way to the Top
While many new cryptocurrencies with strong functionality and unique use-cases were rewarded with strong returns, it was memes that powered the greatest returns in cryptocurrencies this past year.
Dogecoin’s surge after Elon Musk’s “adoption” saw many other dog coins follow, with SHIB benefitting the most and returning an astounding 19.85 million percent.
But ever since Dogecoin’s run from $0.07 to a high of $0.74 in Q2 of last year, the original meme coin’s price has slowly bled -77% down to $0.17 at the time of writing. After the roller coaster ride of last year, 2022 started with a positive catalyst for Dogecoin holders as Elon Musk announced DOGE can be used to purchase Tesla merchandise.
Gamifying the Crypto Industry
The intersection between crypto, games, and the metaverse became more than just a pipe dream in 2021. Axie Infinity was the first crypto native game to successfully establish a play to earn structure that combines its native token (AXS) and in-game NFTs, becoming a sensation and source of income for many in the Philippines.
Other crypto gaming projects like Defi Kingdoms are putting recognizable game interfaces on decentralized finance applications, with the decentralized exchange becoming the town’s “marketplace” and yield farms being the “gardens” where yield is harvested. This fantasy aesthetic is more than just a new coat of paint, as the project with $1.04B of total value locked is developing an underlying play-to-earn game.
Along with gamification, 2021 saw crypto native and non-crypto developers put a big emphasis on the digital worlds or metaverses users will inhabit. Facebook’s name change to Meta resulted in the two prominent metaverse projects The Sandbox (SAND) and Decentraland (MANA) surge another few hundred percent to finish off the year at 16,261% and 4,104% returns respectively.
With so many eyes on the crypto sector after the 2021’s breakout year, we’ll see how developing U.S. regulation and changing macro conditions affect cryptocurrencies in 2022.
The Periodic Table of Commodity Returns (2012-2021)
Energy fuels led the way as commodity prices surged in 2021, with only precious metals providing negative returns.
The Periodic Table of Commodity Returns (2022 Edition)
For investors, 2021 was a year in which nearly every asset class finished in the green, with commodities providing some of the best returns.
The S&P Goldman Sachs Commodity Index (GSCI) was the third best-performing asset class in 2021, returning 37.1% and beating out real estate and all major equity indices.
This graphic from U.S. Global Investors tracks individual commodity returns over the past decade, ranking them based on their individual performance each year.
Commodity Prices Surge in 2021
After a strong performance from commodities (metals especially) in the year prior, 2021 was all about energy commodities.
The top three performers for 2021 were energy fuels, with coal providing the single best annual return of any commodity over the past 10 years at 160.6%. According to U.S. Global Investors, coal was also the least volatile commodity of 2021, meaning investors had a smooth ride as the fossil fuel surged in price.
Source: U.S. Global Investors
The only commodities in the red this year were precious metals, which failed to stay positive despite rising inflation across goods and asset prices. Gold and silver had returns of -3.6% and -11.7% respectively, with platinum returning -9.6% and palladium, the worst performing commodity of 2021, at -22.2%.
Aside from the precious metals, every other commodity managed double-digit positive returns, with four commodities (crude oil, coal, aluminum, and wheat) having their best single-year performances of the past decade.
Energy Commodities Outperform as the World Reopens
The partial resumption of travel and the reopening of businesses in 2021 were both powerful catalysts that fueled the price rise of energy commodities.
After crude oil’s dip into negative prices in April 2020, black gold had a strong comeback in 2021 as it returned 55.01% while being the most volatile commodity of the year.
Natural gas prices also rose significantly (46.91%), with the UK and Europe’s natural gas prices rising even more as supply constraints came up against the winter demand surge.
Despite being the second worst performer of 2020 with the clean energy transition on the horizon, coal was 2021’s best commodity.
High electricity demand saw coal return in style, especially in China which accounts for one-third of global coal consumption.
Base Metals Beat out Precious Metals
2021 was a tale of two metals, as precious metals and base metals had opposing returns.
Copper, nickel, zinc, aluminum, and lead, all essential for the clean energy transition, kept up last year’s positive returns as the EV batteries and renewable energy technologies caught investors’ attention.
Demand for these energy metals looks set to continue in 2022, with Tesla having already signed a $1.5 billion deal for 75,000 tonnes of nickel with Talon Metals.
On the other end of the spectrum, precious metals simply sunk like a rock last year.
Investors turned to equities, real estate, and even cryptocurrencies to preserve and grow their investments, rather than the traditionally favorable gold (-3.64%) and silver (-11.72%). Platinum and palladium also lagged behind other commodities, only returning -9.64% and -22.21% respectively.
Grains Bring Steady Gains
In a year of over and underperformers, grains kept up their steady track record and notched their fifth year in a row of positive returns.
Both corn and wheat provided double-digit returns, with corn reaching eight-year highs and wheat reaching prices not seen in over nine years. Overall, these two grains followed 2021’s trend of increasing food prices, as the UN Food and Agriculture Organization’s food price index reached a 10-year high, rising by 17.8% over the course of the year.
As inflation across commodities, assets, and consumer goods surged in 2021, investors will now be keeping a sharp eye for a pullback in 2022. We’ll have to wait and see whether or not the Fed’s plans to increase rates and taper asset purchases will manage to provide price stability in commodities.
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