From the Game Stop affair, which rocked the stock market in January, to the unparalleled craze for “blank check companies”, through the boom in cryptocurrencies, the financial year that is ending is far from over. ‘have been like the others. The duty offers you an overview of some specific elements that marked the year on the financial markets.
The stock market upturn continues
“It was a very good year of stock market performance”, summarizes Jean-René Ouellet, vice-president and investment strategist at Desjardins Wealth Management. “It was more complicated on the bond market side. This means that there is a big disparity between growth portfolios which will have fueled with excellent returns and more cautious and conservative portfolios, which have suffered more, or performed less well, ”he analyzes. Since the start of the year, the S&P 500 Index has risen by more than 25%. Since its low in March 2020, it has gained more than 100%. “We must admit that we have just had three very good years on the stock market, so there are two elements that are essential: humility on past performance, and management of expectations on future returns,” said Mr. Ouellet.
The GameStop case
The American video game retailer GameStop, whose business model has been struggling for several years, has had a very colorful year. In January, its share price (GME) soared. In two weeks, its price jumped more than 1,600%, from around US $ 20, to almost $ 350 between Jan. 12 and Jan. 27. While the company is targeted by short sales – that is to say, investors bet on the fall in the stock price – a horde of small investors gathered on the WallStreetBets forum on the Reddit site are buying heavily. company shares to drive up the share price and teach the stock market leaders a lesson. If the share price drops rapidly in January, there is great volatility in the months that follow, and this, until the end of the year. At the end of December, a GameStop share is still trading for around $ 150. The affair, which caused a lot of noise, is the illustration of the advent of ” same stocks – which are stocks whose value is not determined by the performance of the company, but rather by their popularity on social networks.
The crypto roller coaster
The cryptocurrency market has taken off like never before this year, but it has not been without jolts. “With cryptos, it’s always a roller coaster”, relativizes Martin Lalonde, president of the portfolio management firm Rivemont, which offers an investment fund made up of cryptocurrencies. At the start of the year, the capitalization of all cryptocurrencies was US $ 1 trillion. In November, it was close to 3 trillion, before going down again. Bitcoin continues to dominate the industry by far. However, its market share has dropped dramatically in the past year, to the profit of other cryptocurrencies. Bitcoin accounted for nearly 70% of this market at the start of the year, compared to just 40% at the end of December, according to the CoinMarketCap site. “One striking thing this year that should be emphasized is that institutional players are increasingly interested in cryptocurrencies,” notes Mr. Lalonde. I think we can now say that they are an asset class in their own right, admittedly volatile, that we can choose to own or not. “
Rise of non-fungible tokens
The last year will also have been that of the advent of non-fungible tokens (NFT), or non-fungible tokens. These are those certificates of authenticity, based on blockchain technology, associated with digital assets. Many kinds have been sold: works of art, tweets, a chronicle of the New York Times, American basketball league video footage, etc. Incomprehensible to some, NFTs are nevertheless worth a lot in the eyes of other people, judging by the prices to which some are soaring. At the end of February, the digital collage entitled Everydays: the First 5000 Days, by artist Beeple, sold for US $ 69 million last March at an auction organized by the famous Christie’s house.
Blank check companies are popular
Acquisition companies with a specific vocation, better known under the name of “SPAC” (Special Purpose Acquisition Company), have grown in popularity in 2021. In all, more than 600 companies have gone public in this way this year. This is more than double the data recorded the previous year. In 2020, PSPCs accounted for more than 50% of new U.S. companies listed on the stock exchange, according to the Harvard Business Review. Usually, a company that chooses to go public has to go through the traditional IPO process (initial public offering), also known as PAPE in French (initial public offering). Another option, faster and cheaper, is to merge with a company already present in the markets – a PSPC, nicknamed “the blank check company”. This sudden craze is scrutinized carefully by the SEC, the US federal body for regulating and monitoring financial markets, since some are sounding the alarm bells about the risk of speculation linked to this type of company. Some PSPCs have teamed up with celebrities to increase their visibility, but they have left investors mostly in the red. In all, 21 of 33 PSPCs linked to famous public figures posted negative returns for 2021, the magazine noted. Fortune.