After a four-day break for Easter, I suspect some investors are itching for markets to reopen. Others await the UK’s 2021/22 tax year to start on Tuesday, so that they can pump money into tax-free ISAs, pensions and so on. But after a lively start to 2021, I’m looking back to see how investors like me have fared in various markets. I’ll start with the UK’s main index, the FTSE 100. To show year-to-date (YTD) performances, I’ve included Thursday, 1 April in my calculations.
The UK FTSE 100 gains 4.3%
The FTSE 100 ended 2020 at 6,460.52 points. On April Fool’s Day, it closed at 6,737.30. Thus, the UK’s blue-chip index has gained almost 277 points so far in 2021, an uplift of 4.3%. Not bad, considering Covid-19 is still wreaking havoc in large parts of the world. What’s more, a 4.3% return in three months is many times what I could earn in a top-paying savings account. But I always remember that investing in shares is far riskier than adding to savings on deposit.
The US S&P 500 climbs 7.0%
In America, the S&P 500 index ended 2020 at 3,756.07 points. Last Thursday, it closed at 4,019.87, just short of its all-time intraday high of 4,020.63 earlier that day. That’s a rise of almost 264 points in 2021, for a return of 7%. That’s 2.7 percentage points more than the FTSE 100’s YTD return. It’s like billionaire investment guru Warren Buffett advises: “Never bet against America.”
The US Nasdaq rises 4.6%
Meanwhile, the Nasdaq Composite tech index ended 2020 at 12,888.28 points. On Thursday, it closed at 13,480.11, gaining almost 592 points in 2021. That’s an increase of 4.6% in 2021, slightly ahead of the FTSE 100’s 4.3%, but behind the S&P 500’s 7% hike. One reason for the Nasdaq underperforming other indices is it includes many highly valued stocks of loss-making tech companies. With US bond yields soaring as bond prices crashed in Q1, some air has leaked out of over-inflated ‘bubble stocks’.
The European STOXX 600 is up 8%
In Europe, the STOXX 600 index ended 2020 at 400.25 points. On Thursday, it closed at 432.22, for a gain of almost 32 points in 2021. That’s a boost of 8%, almost double the FTSE 100’s 4.3% YTD return. It’s also higher than the S&P 500’s 7% rise and the Nasdaq’s 4.6% gain. Some analysts have been arguing for years that European stocks were undervalued. Maybe this year they will be proved right?
The FTSE 100 and stock prices in the rest of 2021
The million-dollar question is: what will happen to UK, US, European and other stocks in the rest of 2021? I’m afraid that I don’t have the foggiest idea. And no-one else does, for that matter. But an old market expression springs to mind: “As goes January, so goes the year.” In other words, a good start to the year for, say, the FTSE 100 often translates into positive returns for the whole year. And with shares and stock prices already in positive territory after three months, the odds are increasing on positive returns for UK, US and European investors in 2021.
What are my plans for the rest of 2021? My family portfolio is heavily weighted towards US and global stocks, with modest exposure to UK shares. But I see FTSE 100 value stocks as my #1 pick for the next decade. By buying cheap UK shares today, I hope to bank 5%+ in yearly cash dividends, while waiting patiently for future capital gains. That’s why I’ll be investing large sums into UK shares in the second quarter of 2021.
