By: Dáire Ferguson, CEO at AvaTrade
Financial markets have continued to experience an almost unprecedented amount of volatility this year, amidst the ongoing Covid-19 pandemic. As 2021 draws to a close, it’s worth reviewing the stock market performance of some notable industries throughout the year, to see how they got on.
Pharmaceutical stocks continued to perform well
This year, pharmaceutical companies have picked up where they left off in 2020, delivering very solid performances. With the mass distribution of Covid-19 vaccines around the world, companies producing these performed exceptionally well this calendar year. For example, the Year-To-Date (YTD) return for Moderna was 164.55%, while Pfizer’s YTD return stood at 65.77%. What’s more, this growth wasn’t just limited to those companies’ producing vaccines. Other firms, such as West Pharmaceutical Services, which delivers Covid-19 vaccines safely and securely in containers, also enjoyed a strong 2021 (54.96% YTD return).
Strong showing from cybersecurity stocks
2021 was a good year for cybersecurity companies. The world continued to feel the effects of the Covid-19 pandemic, with many businesses experiencing difficulties due to the hybrid working structure, where employees need protecting whether they are at home or in the office. Companies implemented measures to ensure their increasingly distributed operations were safe and secure, to protect against the potential of a cyberattack. Further to this, numerous high-profile cyberattacks took place this year, including the Colonial Pipeline ransomware attack. Attacks like this one emphasised the need for companies to prioritise their security systems. As a result of this, the YTD return for companies in the cybersecurity industry was very strong. For example, Fortinet, a provider of cybersecurity related hardware, delivered a YTD return of over 120%, while Palo Alto Networks, an enterprise cybersecurity platform, YTD return was just under 50%.
Energy firms delivered significant growth
Rising gas and oil prices have resulted in 2021 being a good year for energy companies. These increases in price can largely be attributed to supply and demand dynamics. Firstly, oil and gas became in heavy demand again as soon as economies around the world began to reopen following worldwide lockdowns, as countries required the commodities for manufacturing, travel, and other purposes. Secondly, extreme weather events, most notably Hurricane Ida, which caused significant disruption to oil and gas operations in the Gulf of Mexico in late August and early September, also caused the prices of these two natural resources to rise. Finally, as developing countries, such as Brazil and India, require more and more energy, the demand for oil and gas increases, while the amount available takes a hit, driving the price of the commodities up. Looking specifically at companies’ operating in this sector, Devon Energy (142%), Marathon Oil (112.79%) and Diamondback Energy (104.79%) all saw their YTD return exceed 100%. All in all, the increased demand and lack of supply of oil and gas has led to energy companies performing well in 2021.
Work from home stocks took a beating
Work from home stocks took a major hit this year. Instead of investing in work from home shares, investors chose to put money into re-opening stocks at the expense of work from home stocks. As lockdowns around the world lifted, companies started to open their doors to employees once again. With members of staff now back in the office, there was a reduction in the reliance on work from home tools, such as Zoom. In fact, Zoom’s YTD return was -41.31%. As well as this, with facilities such as leisure centres and gyms reopening, people had less of a desire to have exercise equipment and machines at home. This caused the YTD return of Peloton, the exercise equipment provider, to decrease by a staggering -74.49%.
Poor year for travel companies
As was the case in 2020, 2021 was another poor year for travel companies. Travel restrictions still being in place throughout the majority of the calendar year hit the industry hard. So too did the numerous – and costly – testing requirements needed to travel from one country to another, which deterred people from going abroad. As such, the share prices of travel firms took a hit. Airlines such as Southwest Airlines suffered (-15.55% YTD return), while the same can be said of resort developers and operators like Wynn Resorts (-28.40% YTD return) and Las Vegas Sands (-42.70% YTD return). Travel restrictions also impacted the cruising industry, with some countries implementing measures which prevented ships from certain destinations from docking at their ports. Both Carnival and Norwegian, international cruises lines, delivered poor YTD returns, coming in at -12.74% and -18.44% respectively. While the travel industry has shown glimpses of recovery in the latter months of the year, the spread of the Omicron variant has the potential to destabilise the entire industry once again.
*Figures are accurate as of 22nd December 2021
**All of these stocks are available to trade on AvaTrade