Stocks: US stocks rose another 29% last year, how long can the party last?

Not yet a subscriber? Sign up free below.

Same again, please

US stock markets (S&P 500 index) closed out 2021 with a total return of 29% — adding another green bar to the long history of US stock market appreciation.

That means that for the last 3 years US stock markets have gained — on average — 26% a year, and two of those years were during a global pandemic. It also means that it is the best 3-year stretch since 1997-1999.

The gains made in equity markets last year were spurred on by the same forces at play in 2020; supportive monetary policy, significant fiscal stimulus from governments and the relentless upward march of big tech. Indeed, just a few of the FAATMAN group of stocks — Facebook, Apple, Amazon, Tesla, Microsoft, Alphabet and Nvidia (sorry Netflix) — now account for somewhere between 25-30% of the entire S&P 500 index, depending on the day. Apple alone is almost 7%.

How long can the party last?

The most worrying indicator that could stop the music is inflation — which has returned in pretty much every market in the world, to varying extents. To combat inflation central banks are almost certainly going to raise interest rates. Will stocks hold onto their gains if interest rates finally move from historic lows? We wish we knew.

Not yet a subscriber? Sign up free below.


Stories from this newsletter

RIP your old BlackBerry: It's really the end this time
Omicron: Early evidence from the UK is the silver lining in a dark cloud of cases
Stocks: US stocks rose another 29% last year, how long can the party last?
We and our partners use cookies and similar technologies (“Cookies”) on our website and in our newsletters for performance, analytical or advertising purposes to ensure you have the best experience on our site and/or interaction with us. To find out more about the use of Cookies, see our Cookie Notice. Please click OK if you consent to our use of Cookies or click Manage my Preferences to manage your Cookie preferences.