Year in Review: 2021

A wild year in finance

Written by:

Matt Allen

A passion for helping the average person led Matt to start his newsletter, The Common Capitalist, which is a newsletter that focuses on helping the average investor better understand finance.

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Year in Review: 2021

A wild year in finance

Dear Friends,

I would like to thank everyone for being a subscriber. I am very grateful for everyone. I love hearing the positive feedback from each of you. Our newsletter showed explosive growth in 2021. My plan is to triple our growth in 2022, the more we can expand the newsletter, the more content that we can produce. Because of your support, I am able to play a small part in helping close the financial education gap.

I believe that we are facing some of the most challenging times in the financial/political/economic world. The best way to deal with these challenging times is through learning.

If you would like to become a paid subscriber and receive multiple newsletters a week, you can subscribe here.

2021 Performance of Popular Indices & Cryptos:

Bitcoin: +66%
S&P 500: +27%
Nasdaq: +27%
Dow Jones: +19%
Gold: -3.5%
Silver: -11.4%

Bitcoin continues to dominate the S&P 500. We still have financial advisors, who think Bitcoin is to “risky” for portfolios. Maybe it’s just their WallStreet Boss??

2021 was one of the most interesting years in the financial market. We went from the March 2020 recession to an explosion in the stock market that is still going on today. Financial Historians are already calling this market a “Bull Recession.”

If you didn’t know, the stock market is considered “a bear market”, when the S&P 500 is down 20% from all-time highs. This happened in March 2020. When the stock market is in a “bear market", we have a 70% chance of the economy going into a recession. This was the fastest recovery ever from a bear market.

S&P 500

The S&P 500 hit all-time highs for a record 69 times in 2021.

(S&P 500= The 500 Largest companies in the world)

Through my research, I found that 5 stocks made up 32.6% of all S&P 500 returns:

Apple, Microsoft, Nvidia, Tesla and Alphabet’s Google were a major part of this 2021 run. This means that investors were saying: “If it aint broke, don’t fix it.”

Historically, we would like to see investors spread some of their money around to every sector. This was also reflected in the Nasdaq 100 Index finishing right around the S&P 500.

The Energy and Oil Sector had a massive 2021. They came in second place behind technology:

Devon Energy (+198%), Marathon Oil (+150%), DiamondBack Energy (132%) all led this sector. Devon and Marathon Oil had the two best performances of 2021. Keep in mind that they had two of the WORST in 2020.

Simple Matt Allen Tip: If your gas is costing you more money, the oil stocks are getting ready to shoot up. In 2020, gas was cheap and these stocks were cheap. In 2021, gas is expensive and these stocks did great. In an election year, I would expect gas to become cheaper so I wouldn’t worry about them right now. Buy low, Sell High.

As you can tell, America and our Western Allies led the Global markets. 🙂

China (Hang Seng) and the East did not have a very good year. The Chinese government cracked down on high-tech growth stocks and a plethora of data showed that the world’s number 2 economy is beginning to slow. With that being said, Charlie Munger (Warren Buffett’s right hand man) is buying up China stocks. He is banking on the fact that the Chinese Government will eventually change course.

Crypto and Commodities

Crypto and Commodities had a great 2021. Bitcoin led every single major index, and we have already discussed oil. If you work in construction, you probably saw a reflection of some of these commodity prices in your sector.

Simple Matt Allen Tip: Just like Oil, if you see a commodity that is going through the roof, buy the stock of a company that WHOLESALES the commodity.

I sent out Marathon Digital Holdings ($MARA) at 95 cents to our premium subscribers, and we watched the stock go from 95 cents to $83 on November 8th. If you would invested $950, it would have turned into $83,000. If you would have invested $9,500, it would have turned into $830,000. Mara mines bitcoin, so I knew that if Bitcoin soared, the bitcoin miners would as well.

The craziest part of 2021 is that Coffee Beans led every major stock index, beat Bitcoin, and led every commodity.

Due to geopolitics, climate havoc, and COVID, futures contracts on coffee have been skyrocketing for the past year, up an astounding 76.3% in 2021. (I would have never predicted this, if my life depended on it. haha)

Inflation and Interest Rates

The biggest story of 2021 was the fact that the inflation rate soared to a record 6.8%. This means that the money in your bank account lost 6.8% in purchasing power. This is why it is so important to make your money work for you.

In response to the surging inflation, the Fed has announced they’ll lower their asset purchasing in 2022. They will be doing a series of rate hikes in 2022 throughout the year. We are unsure of the future of inflation, but we do know that it is hurting us bad.

Growth Stocks

Lastly, we saw the biggest boom of the growth stock sector in 2020. However, we saw the biggest bust of the growth stock sector in 2021.

This was due to many reasons: 1. Simply, the growth stocks were completely overvalued. 2. People invest in growth stocks, when we have low interest rates. As the interest rates were talked about being raised, investors moved their money else where.

I personally believe that if you find a couple of great growth stocks, you will dominate over the next decade.

Bonus:

Returns, Last 10 Years:

Bitcoin: +1,259,540%
Tesla: +17,950%
NVIDIA: +8,840%
Netflix: +5,706%
AMD: +2,535%
AMZN: +1,818%
Dominos: +1,797%
Microsoft: +1,484%
Apple: +1,323%
Google: +826%
S&P 500: +351%
Gold: +8%

I look forward to this new year! Let’s all learn and make a few dollars while we do it!

Stay Hungry, Stay Long

Matt Allen

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