Financial and economic records broken in 2021
2021 has been a truly unusual year. After 2020, a year heavy with the effects of the global COVID-19 pandemic which wreaked havoc on global markets, forcing families to return home with lockdowns and businesses to close their doors, 2021 saw the advent safe and effective vaccines and renewed consumer confidence.
However, due to structural constraints and production gaps caused by COVID-19, this resurgence in consumer demand has resulted in several disruptions, anomalies and record prices in some markets.
Here, we take a look back at 2021 and review some of the most important records broken over the past year.
Key points to remember
- As the global economy emerged from the 2020 slump caused by the COVID19 pandemic, 2021 saw a flurry of records.
- From the stock market to home and car prices, 2021 has seen record prices in various markets.
- A record amount of capital raising and transactions also took place in 2021 as businesses and bankers scrambled to make up for lost time in 2020.
Inflation refers to a general increase in prices in an economy. While there are several reasons advanced by economists for this phenomenon, it can also be interpreted as a decrease in the purchasing power of money (or its general devaluation). In other words, with inflation, every dollar you have buys you less stuff.
Since the 2008-09 financial crisis and the Great Recession that followed, inflation in the United States and much of the world, for that matter, has remained fairly low. Even though central banks cut interest rates to zero in order to stimulate demand, prices did not increase much on an annual basis until 2020.
However, when consumers started buying again in the spring of 2021, prices started to rise. This has been attributed to producers who cut back or were forced to shut down due to COVID’s inability in 2020 to roll back on time. At the same time, shipping costs and grumbling at ports around the world have resulted in further price hikes, along with delays and frayed supply chains.
By the end of the summer, it was clear that inflation was upon us, although some economists and central bankers insisted it should only be a temporary spike as the economy was picking up. However, in the winter of 2021, it became clear that the price hike appeared to have set in. The Bureau of Labor Statistics (BLS), which compiles one of the major inflation indices called the Consumer Price Index (CPI), saw prices rose 6.8% during the 12-month period completed in November 2021, a rate not seen since the early 1980s. At the end of November 2021, the CPI index reached a record high of 278.88.
The stock market
Even as inflation was eating away at your portfolio, you may also have noticed that your investments and your retirement portfolio are doing quite well. In fact, 2021 saw record highs in the US stock markets. While part of this increase can also be attributed to rising inflation, corporate profits have been boosted by pent-up consumer demand that spilled over into 2021.
After an initial massive sell-off in March 2020 when COVID first hit, stocks rebounded through 2020 and into 2021. In November 2021, the S&P 500 hit a record high of $ 4,743. and the Dow Jones Industrial Average (DJIA) a record high of $ 36,565. The tech-rich NASDAQ also posted a record high of $ 16,212 that month, as working from home, online ordering and teleconferencing have become more and more the norm.
With the stock markets on fire, companies have been rushing to go public and sell their stocks through IPOs at an all-time high. These included tech companies like DiDi, Bumble, and AppLovin; as well as financial platforms like RobinHood and Coinbase (which was a direct problem). 2021 is on track to see nearly 1,000 IPOs, more than double the number in 2020 and 4 times the amount in 2019.
A record nineteen companies raised more than $ 1 billion each via an IPO in 2021. In total, a record amount of over $ 1,000 billion was raised through initial public offerings and direct listings this year.
Mergers and Acquisitions
Not surprisingly, global M&A activity in 2021 also broke records. Business combinations and private equity transactions accounted for over 40,000 transactions, with an aggregate valuation of over $ 6 trillion.
Part of the reason for this increase in deals can be attributed to catching up, as the volume of mergers and acquisitions from the previous year was reduced, with just $ 3.6 trillion in deals closed in 2020.
It wasn’t just a banner year for stock issuers. High yield bond issuance (aka “junk bonds”) hit a record high of $ 432 billion in 2021 as businesses large and small scrambled to borrow money. relatively cheap money to investors as inflation began to set in.
Junk Bonds are relatively riskier debt securities that are classified as lower than investment grade by credit bureaus. This means that there is a greater chance of default, but there are also higher returns to compensate investors for this additional risk. So, as interest rates stay low and inflation rises, yield-seeking investors are eager to grab that record amount of new, riskier debt.
Real estate is another sector that saw record prices in 2021. As people have crouched down with COVID lockdowns, finding the right home to hide in has become increasingly important to many households. As a result, home buyers were willing to pay more for that perfect location. At the same time, low interest rates meant mortgages were still affordable, fueling house price increases not seen since before the 2007-08 housing crisis.
Home prices really started to climb in early summer 2021, with a record 19.7% year-on-year increase in July (before the housing bubble, the record year-on-year increase was 14.51% in September 2005). While the rate of increase in home prices has since moderated, the Case-Schiller Home Price Index, which measures average home prices in the United States, hit a new all-time high of 271.2 in September. 2021.
Households also shelled out record amounts for new cars in 2021. As of September 21, the average price of a new car in the United States topped $ 45,000, according to Kelley Blue Book (KBB), an increase of more by 12% compared to the same period in 2020.
Used car shoppers have also experienced sticker shock. In September 2021, the average US price for a used vehicle jumped nearly 25% in just one year, to reach $ 25,829.
A shortage of inventory, disruptions to the global supply chain, overseas shipping delays, and a shortage of microchips needed to power today’s high-tech vehicles are all driving up car prices.
The crypto market also set new records in 2021, with the total value of cryptocurrencies reaching just $ 3 trillion in November 2021. Of course, Bitcoin remained the most valuable of all cryptocurrencies, dominating over 40% of that total market cap until 2021. After declining from a high of over $ 64,000 in April 2021, prices BTC’s climbed to just under $ 68,500 in November, before retreating once Continued.
In November 2021, Ether, the Ethereum blockchain token, also hit a record high of $ 4,850. commanding over a fifth of the entire crypto market capitalization.
Several other cryptocurrencies, altcoins, and tokens also hit record highs in 2021, including coins like Dogecoin and Shiba Inu, as well as established tokens like Ripple’s XRP, Binance Coin, Solana, and Cardano, among several other records in the world. space.
The debt ceiling
In the United States, Congress must approve all expenses related to the issuance of public debt. This can sometimes lead to a political pool game, with the threat of a damaging government shutdown or sovereign default if the level of new debt (called the debt ceiling) is not approved.
As in the past, that stalemate occurred again in October 2021, with an ultimate resolution that raised the debt ceiling to a record $ 28.9 trillion.
In addition to a record economy, darker records were also set in 2021. Global warming has continued to produce new worryingly high average temperatures. According to the National Oceanic and Atmospheric Administration (NOAA), July 2021 was the hottest month on record. Additionally, NOAA predicts 2021 will be among the hottest ten years on record.
This is of concern, as climate change and warmer temperatures can lead to sea level rise, crop failures, habitat destruction, and heat-related ailments or illnesses among human populations. Scientists and policymakers have urged action, but it is not clear whether it is already too late to reverse the effects caused by industrialization and fossil fuel emissions.
Climate change can also cause enormous property damage and other economic fallout. 2021 was a record year for hurricanes causing nearly $ 105 billion in losses (up from then record $ 100 in 2020), resulting from no less than $ 18 billion in events.