US stock indexes dipped on the last trading day of 2021, but still finished the year near record highs supported by strong corporate seasons, massive fiscal and monetary stimulus, a fast-recovering economy, and signs of a solid rebound in the labor market. In 2021, the Dow Jones increased by 18.7%, the Nasdaq Composite jumped 21.4%, and the S&P 500 surged 26.9%. The energy sector led the gains, outperforming all other sector indexes, followed by real estate and technology stocks. Looking ahead investors should remain cautious due to concerns over the pace of monetary policy tightening amid rising inflation, and as they eye midterm elections in the US Congress next year.
The DAX 30 ended slightly up at 15,885 on the last trading day of 2021, remaining close to Tuesday's one-month high of 15,964 and booking a yearly gain of 15.8%. Investors became more optimistic about the economic outlook as COVID vaccines proved to be mostly effective at preventing hospitalization in people infected with the Omicron variant and as countries across Europe managed to avoid imposing further restrictions despite record rises in new cases. Still, markets were in a cautious mood as concerns grew over the pace of the bloc's economic recovery next year in a rising interest rate and inflation environment. Elsewhere, the CAC 40 held close to a recent record high and the FTSE 100 was little-changed at a 22-month high. Stock markets in Germany, Italy and Spain will be closed on Friday, while Paris and London will trade for half a session, ahead of the New Year.
The CAC 40 Index closed at 7,153 in Paris’s final trading day of the year, not far from all-time highs of 7,201.65 from December 29th and gaining 29% on the year. It was the steepest yearly increase for the index since 1999, underpinned by strong economic recovery in the luxury goods, tech, and banking sectors. In its latest economic outlook, INSEE revised France’s yearly GDP projections upwards to 6.7%, the highest rate since 1969. On the corporate front, consumer discretionary goods soared 39% on the year, carried by a strong recovery of luxury goods. Hermes grew 74%, driven by higher demand in Asian markets, and was added to the Stoxx 50 index in the beginning of December. LVMH gained 42% on the year and closed around record highs. At the same time, Airbus rose 25%, as vaccine rollouts and opening borders increased the demand from commercial airlines in 2021. The financial sector rose 37% on the year, driven by Societe Generale (77.5%), aided by the ample stimulus of the ECB’s PEPP.
The FTSE MIB was relatively unchanged to close at 27,346.83 on Milan's last trading day of the year, hovering around five-week highs and booking gains of 23% on the year. It was the second steepest yearly increase for the index since its inception in 2009, boosted by a robust economic recovery from the start of the pandemic in 2020, featuring strong performances by the banking, industry, and technology sectors. Investors were reassured by Prime Minister Mario Draghi’s ascension in February and his technocratic government, as he won EU approval to invest EUR 200 billion of EU recovery funds into the Italian Economy. On the corporate front, financial stocks rose 32% on the year, led by UniCredit (77.2%) amid a new CEO, expansion through M&A, and a renewed industrial plan that forecasts a 10% increase in yearly net profits. Industrial stocks rose 25.8%, led by Cnh Industrial (65.4%), from its activity growth and the largely awaited spin-off of its truck-making subsidiary Iveco.
The Nikkei 225 Index rose 4.91% to 28,792 and the broader Topix Index advanced 10.4% to 1,992 in 2021, marking their highest annual gains since 1989, driven by fiscal and monetary stimulus and a robust post-pandemic economic recovery. Japanese stocks navigated an extremely volatile and eventful year, characterized by the full lifting of a nearly 6-month long state of emergency which paved the way for a faster economic recovery, the election of prime minister Fumio Kishida who led the passing of record fiscal packages, an accommodative Bank of Japan that kept supportive monetary policies in place and the emergence of the omicron variant that threatens to derail global growth. Reopening plays led the gains in Japanese equities this year while 2020’s pandemic winners like healthcare and stay-at-home stocks slumped. Looking ahead to 2022, investors monitor developments around the virus and the direction of inflation, seen as main catalysts for major central bank and market moves.
The BSE Sensex ended 459.5 points or 0.8% higher to close at 58,253.82 on the last day of 2021 amid mixed global cues and led by gains in banks, consumer goods and autos. Investors remained optimistic about the prospect of strong earnings from technology companies and as they eye the budget session next year. Considering 2021 as a whole, the BSE Sensex booked a 22% yearly gain, enjoying its best year since 2017. The index peaked at 61,765.59 in October, driven by recovery from the pandemic-induced slump and strong retail participation in market debuts of companies like Paytm, Nykaa and Zomato. However, it retreated almost 7% in the last two months amid concerns of overvaluations of Indian equities, relentless foreign fund outflows, signs of slowing economic recovery and surging Omicron cases.
The Shanghai Composite Index advanced 4.8% to 3,640 and the Shenzhen Component Index rose 2.7% to 14,857 in 2021, as mainland stocks managed to book annual gains in a challenging investment environment. Chinese stocks navigated a volatile and eventful year, marked by local Covid outbreaks and resulting lockdowns, energy shortages that required government intervention, an ongoing debt crisis in the property sector, regulatory crackdowns in technology and other companies and increased geopolitical tensions. Meanwhile, foreign capital inflow to Chinese equity markets reached a record high in 2021 as investors bet on the relative attractiveness of Chinese firms. Mainland stocks also benefited from targeted policy easing as authorities battled against a slowing economy. New energy firms outperformed throughout the year amid a global push toward clean energy, along with manufacturing companies, while consumer-related stocks fared worst.
The S&P/ASX 200 Index gained 13% to 7,445 in 2021, reversing losses from the pandemic-battered 2020, boosted by central bank stimulus and record-low interest rates. The Reserve Bank of Australia has maintained one of the most dovish policy stances, pledging to keep the cash rate at a record low 0.1% in 2022. Australia continued to ease Covid-related curbs despite record high daily cases, as the country aims to learn to live with the virus amid a “no lockdown” strategy. The year was also marked by record corporate deals and initial public offerings. Australian banks logged their best year since 2013, with the top four banks rising between 10% and 28% this year. Heavyweight miners also gained for a 6th straight year due to the global economic recovery, while lithium explorers outperformed amid a global shift towards clean energy. Meanwhile, technology stocks posted annual losses for the first time since 2011 as the buy now pay later firms lost appeal.