Courtesy CFM Tax and Investment Advisors
By Bill Canty, CPA, CFP
Even as the pandemic continued, 2021 was another strong year for the markets, though returns varied a bit across various market segments. The S&P 500 index gained 28.7 percent in 2021 as large cap stocks had another strong year. The index set numerous new highs during the year. This marks the third consecutive strong year for the S&P and for stocks.
The tech-heavy NASDAQ gained 21.4 percent in 2021 and the Dow Jones Industrial Average added 18.7 percent for the year. This represented only the sixth time that the S&P 500 beat both the Dow and the NASDAQ in the same year, and the first time this has happened since 2005.
The Russell 2000, made up of small cap stocks, was up 13.7 percent for the year. Most broad non-U.S. stock indexes also under performed that U.S. market.
Gains were not uniform and 2021 saw the rise of “meme” stocks where large groups of investors would buy shares of stocks like Game Stop and AMC Entertainment in an attempt to bid up the price and inflict losses on hedge funds who had short positions in the shares.
Gains across the S&P 500 were concentrated to an extent, with five stocks comprising just under 33 percent of the index’s returns according to Goldman Sachs. The five stocks were Apple, Microsoft, Nvidia, Tesla and Alphabet (parent of Google).
Dissecting the gains in the S&P 500 showed that the technology sector of the S&P 500 played a true leadership role in the gains of the index in 2022 as it has over the past several years.
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