3 market lessons from the 1st half of 2021 (meme stocks, crypto and inflation). And 3 to look out for in H2...

 

Well here you have it folks, an amazing start to the year, notably when it comes to your investments. With a 14% return the S&P notched its best H1 in 23 years (see headline above). What are the top 3 takeaways from the first 6 months of 2021, they are here (in my humble opinion):

  • The rise (and rise and rise) and staying power of meme stocks (or stonks depending on your point of view). The beginning of the year was dominated by the GME and AMC saga with even non financial news outlets focusing on this story. I don't need to rehash it here, but this is a post I wrote about earlier  (https://thrivingwithinterest.blogspot.com/2021/06/democracy-at-work-meme-stocks-are-back.html). What is interesting is that after a quiet few months and a little retracement they actually managed to hold on to most of their gains and in the case of AMC closed up much higher by the time June rolled around. The little investor continues to gain in power (continue reading as this relates to one of my 3 things to look out for below);
  • The increased adoption and acceptance of crypto currencies. So many of my friends, students and acquaintances have asked me abut this. Despite a bit of a pullback since mid April, they are still up quite a bit over the first 6 months of the year and are here to stay. It appears highly unlikely that they will go back to zero as many have predicted. Although I believe it will take a little while longer for them to resume their upward trend (see previous blog post on this https://thrivingwithinterest.blogspot.com/2021/06/another-50-bitcoin-price-correction.html) they are becoming more widely adopted as an asset class. The cartoon above best captures my feeling about it.
  • The return of inflation. Again I have written a bit about this recently (https://thrivingwithinterest.blogspot.com/2021/06/high-inflation-yet-stock-market-up.html) and I think that it will last for a while longer. This has been a big talking point and certainly something that investors have discussed at length and will continue to fret about. Yet I don't think it shouldn't hurt the market too badly as outlined in the post above. Just something to be aware of and it should help those that have a mortgage or other forms of loans.
Now, what are some of the things to look out for:
  • Robinhood IPO: As a parallel to the first bulletpoint, this should be one of the blockbuster IPOs of the 2nd half. I would expect it to do well, especially given the fact that they are rewarding their users with shares, I am not a huge fan of the company and how they go about their business, but I can recognize an attractive investment opportunity when presented with one. This seems like a sure fire winner;
  • Housing market slowdown: although I am not sure that prices will fall anytime soon, I do get the feeling that we are headed towards a stalemate. Prices too high for anything that is really affordable for anyone in a non .1% income bracket. Therefore we should continue to see volumes dwindle and eventually there will either more more supply come to market in late 2021/early 2022 or prices will moderate to low single digit rises. Not to mention that the Fed will continue to talk about raising rates, which should begin to get priced into mortgage rates. That being said, not a bad time to refinance, as written about a few days ago (https://thrivingwithinterest.blogspot.com/2021/07/housing-market-up-dont-buy-but.html)
  • Renewed interest in European stocks: Those economies have been slower to reopen given they have struggled with vaccine rollouts as compared with the USA. However things should begin to improve in the 2nd half of 2021 and they remain very cheap. Couple this with a low base case effect, earnings for companies in H2 and early 2022 should show very strong growth which is something that investors love. Here are more details from an earlier post (https://thrivingwithinterest.blogspot.com/2021/05/where-to-invest-now-europe-of-course.html)
Enjoy and keep on making money!



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