As I write these words, just after Christmas, London’s Footsie stands at 7,432. Although I can’t predict quite where it will close the year on 31 December, I can’t imagine that the value will be very much different.
By comparison, the FTSE 100 closed 2020 at 6,603 — meaning that the market rose almost 13% in 2021.
That said, its closing value on 31 December 2020 was already much higher than its Covid-induced nadir of 4,944 on 23 March 2020, the day that lockdown was announced. By late-summer, the mega-bargains were becoming scarcer.
Wealth-constraining trackers
Even so, the index tracker crowd will have been happy with that near-13% gain during 2021. While the market today isn’t quite back to the Footsie’s 7,604 on 2 January 2020 — its peak value for the year — it isn’t far short.
And index trackers are deservedly popular, especially at the ultra-low costs typical of today’s offerings.
But if 2021 — and indeed, the post-lockdown recovery in general — has taught us anything, it is that trackers are a poor tool for profiting from company-specific or sector-specific share price recoveries. Which is what we’ve seen in 2021.
For as Covid-related fears and clampdowns have eased, a good number of companies have experienced surges in their share price far beyond the near-13% rise of the market as a whole.
2021’s winners
As I’ve said, I’m writing this ahead of New Year’s Eve — December 29th, to be exact. So the figures that I’m looking at compare share prices on 31 December 2020 with 23 December 2021.
Full-year outcomes might be slightly different, but the broad picture will be unchanged, I’m sure.
Looking at my own portfolio, for instance, I see that Greggs rose 82% over the period. Lloyds Banking Group, 31%. Marks & Spencer, 69%. Royal Dutch Shell, 31%. IMI, 50%. Aviva, 26%. Tritax Big Box REIT, 43%. Warehouse REIT, 47%. LXi REIT, 22%. And so on, and so on.
Outside my portfolio, other investors have also prospered. Investors in Croda International, for instance: up 51%. Diageo, up 40%. Ferguson (as the plumbing and building supplies firm Wolseley is called these days), up 47%. Glencore, up 61%. Meggitt, up 58%. And Tullow Oil, up 49%.
Not just a rebound
Now, for many investors, rises such as these will have simply represented a return — or in some cases, a partial return — to pre-pandemic share price levels.
But that isn’t the case for all investors. Because a goodly number will — like me — have topped-up existing holdings, or taken new positions, in shares in either late 2020 or early 2021.
So the odds are reasonable that a fair few of them will have done well, as their picks have prospered.
You didn’t have to be a genius, for instance, to see that resources stocks would do well as the global economic recovery picked up speed.
Surplus cash
And make no mistake: such calls were being made, and money was being invested, rather than spent elsewhere.
As I’ve written several times before, Bank of England figures show consumer credit figures falling off a cliff as the pandemic hit, with most months since comprising a net repayment of debt. The annual growth rate of credit card balances, for instance, is minus 5.5%, according to the latest Bank of England Money and Credit report to hand at the time of writing.
And it’s not difficult to see why: for those in work, money continued to roll in, but opportunities to spend it were lacking.
Here’s to wealth
Not everyone was so fortunate, of course, but for those who were, then debt repayment, saving, and investing were obviously sensible choices. The first half of the 2021 saw particularly strong net fund inflows, as investors topped up ISAs, Self-Invested Personal Pensions (SIPPs), and brokerage holdings.
Were you among such investors? Let’s hope so.
And more to the point, let’s hope that you will be among the investors continuing to build their wealth during 2022.
