It’s started with a bang! Markets are off and racing, although with no apparent consistency of direction or reason..
Reflecting on 2021, it was another year of great share market performance supported by a perfect balance of optimism, low unemployment and – most importantly – government stimulus. Technology, speculative and high growth stocks did phenomenally well, particularly those who were benefiting from COVID enforced adaptations that changed behaviour at personal and household levels to small and large enterprises.
So, what’s changed in 2022? A little bit of everything, yet not much at all.
The major behavioural change we are seeing as a result of vaccine uptake is the world beginning to live with COVID-19 rather than in spite of it. Consider life now in our hometown of Brisbane compared to the strict lockdowns of old; no lockdowns means community engagement, work, sport, shopping, travel, exercise, and schools are open for business (although slightly delayed).
What this has meant for markets is meaningful. In January 2022 the usually aggressive term of a ‘market sell-off’ seems like a reasonable description of what’s occurred, but the day-to-day movement is about as unpredictable as the weather. The sectors hardest hit appear to be those who benefited most from the old life of lockdowns.
Speculative assets have been the hardest hit, such as cryptocurrencies and much of the tech space, with some down over 50%+ since December. Zoom (video meetings), Netflix (at home entertainment) and Peloton (at home exercise equipment) are all examples of large companies that benefited greatly when we were all stuck at home, but over the past few months these market darlings of 2020 have lost between 40% and 80% of their share price.
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