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The 14 Charts that Defined 2021 with Josh Brown and Friends

YCharts hosted Josh Brown, founder of The Compound YouTube Channel and CEO of Ritholtz Wealth Management, to discuss The Charts that Defined 2021. Armed with perspectives and charts from top advisors, commentators, and #FinTwit leaders, we broke down 14 major investing themes that shaped 2021 and what they mean for the year to come.

And did we mention the New York vs. Chicago pizza smackdown?

For a further look at the 14 trends that made 2021 what it was—and to find out whether New York (Prince Street Pizza) or Chicago (Lou Malnati’s) won the “best pizza” battle—watch the replay below, or read on for highlights.

Here are The 14 Charts that Defined 2021, with respective timestamps for the video replay:

 1. Interest Rates, with Charlie Bilello (11:53)

 2. Housing Trends, with Blair duQuesnay (17:15)

 3. Job Seekers vs. Job Openings, with Caleb Silver (22:24)

 4. COVID Data, with Samantha Russell (25:44)

 5. A Return to Normalcy, with Michael Batnick (33:10)

 6. The Energy Sector, with Lyn Alden (35:33)

 7. Value vs. Growth, with Jeff Kilburg (40:54)

 8. Mega-cap Tech Stocks, with Beth Kindig (44:02)

 9. IPOs, with Ben Carlson (47:12)

 10. Investors Chasing Performance: ETFs with Dave Nadig (57:07)

 11. The Metaverse, with Rita Cheng (53:22)

 12. Cryptoassets, with Tyrone Ross (54:15)

 13. Electric Automakers with Nikki Dunn (56:47)

14. Retail Investors and Meme Stocks, with Ramp Capital (58:15)

 

1. Interest Rates with Charlie Bilello

“After adjusting for inflation, U.S. bond investors have almost never been compensated less than they are today”, says Charlie Bilello, founder and CEO of Compound Capital Advisors. The “real” interest rate of the 10-year treasury, calculated as its nominal rate less the consumer price index, stands at a near all-time low of -4.7%.

According to Josh, bonds serve two purposes: income and portfolio stability. While he acknowledges bonds did their job in offsetting volatility over the past two years, that is their only purpose right now. Josh recommends saving more money in response to this high valuation, low yield environment.

10 year treasury real interest rate from 1965 through 2021

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2. Housing Trends with Blair duQuesnay

A trend Blair duQuesnay, also of Ritholtz Wealth Management, doesn’t see reversing anytime soon: demand exceeding supply in the housing market. “Housing supply has lagged household formation growth since the end of the 2008-2009 financial crisis, and now that supply shortage is facing a demographic tsunami”, she says.

With mortgage rates at all-time lows, a surge in demand for houses, supply chain constraints, and incomes growing not just at the top but across the board, it has created a perfect storm of sorts for housing prices to spike and remain elevated.

Housing demand and shortage according to Blair duQuesnay of Ritholtz Wealth Management

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3. Job Seekers vs. Job Openings with Caleb Silver

Caleb Silver, Editor-in-Chief of Investopedia, created the following chart to illustrate what’s been on everyone’s mind lately: the “Great Resignation”. He notes both the US quits rate and turnover in the labor market hit record highs amid a record number of job openings.

US unemployed persons, US job openings, US Wages and Salaries growth in 2021

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However, Josh offers a different take. He disagrees with some talk tracks around the “Great Resignation”, arguing that job openings are this high due to an explosion in new business formation. Josh speculates the pandemic provided people an unprecedented opportunity to break from the traditional 9-to-5 and experiment with businesses of their own. Those newfound sole proprietorships that succeeded would go on to hire employees, which created many new jobs.

 

4. COVID Data with Samantha Russell

We have all been impacted by the COVID-19 pandemic in one way or another. Even as the US full vaccination rate approaches 60% of the population—or 200 million people—the total number of COVID deaths in the US continues to climb as well. Samantha Russell, Chief Evangelist at FMG Suite and TwentyOverTen cannot overstate “Covid’s overhang on supply chains, economies, public health, societal norms, public discourse and capital markets in 2021.”

US coronavirus full vaccination rate and US coronavirus deaths as of December 5th 2021

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Despite the dark tunnel that has ensued since early 2020, Josh sees light approaching. In his view, the pandemic is starting to permanently dissipate into smaller “endemics”, which should soon bring stability to today’s headlining economic concerns such as inflation and the supply chain.

 

5. A Return to Normalcy with Michael Batnick

When the pandemic first struck, there were knee-jerk reactions all across markets. A notable response that Michael Batnick, director of research at Ritholtz Wealth Management and creator of The Irrelevant Investor, pointed out was how rapidly the market caps of “stay-at-home” stocks eclipsed established large-caps. A stunning example involves Zoom Communications (ZM) surpassing Exxon Mobil (XOM) in late 2020. The market seemingly priced assets as if the change in environment would be permanent, but 2021 marked the return to normalcy for a lot of these names.

Zoom Communications (ZM) and Exxon Mobil (XOM) performance since January 1, 2020

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6. The Energy Sector with Lyn Alden

Both Josh and independent financial analyst Lyn Alden agree that commodity markets tend to move in large, multi-year cycles of supply and demand. Josh, however, believes oil is in a secular decline, citing the shift to electric cars among vehicle manufacturers as a major driver. He also believes the energy sector will transition over the next decade to include a wider variety of companies beyond oil, such as those in the solar, transmission, and battery industries.

Performance of S&P Energy Sector vs the S&P 500 from 1990 through 2021

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7. Value vs. Growth with Jeff Kilburg

The growth vs. value “wrestling match” will continue in 2022, according to Jeff Kilburg, Chief Investment Officer at Sanctuary Wealth. As illustrated below using YCharts’ new Scatter Plot tool, Kilburg states growth’s outperformance of value in 2021 “appears to be largely attributed to a few growth stock outliers that also trade at a higher PE multiple.”

Value vs. Growth Scatter Plot created by Jeff Kilburg

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But what defines a “growth” stock these days? And what are “value” stocks? Josh’s take is that today, the term “value” is not defined as the cheap stocks in every sector, but rather by the sectors themselves. In this case, any stock not in the “growth” sectors of Technology, Health Care, Consumer Discretionary, and Communication Services defaults to “value”. (YCharts Chief Product Officer Caleb Eplett notes the definition can also vary by investor or institution, and highlighted how Walt Disney (DIS) is a growth company according to Vanguard but treated by iShares as a value holding.)

 

8. Mega-cap Tech Stocks with Beth Kindig

Beth Kindig, lead analyst at the tech-focused I/O Fund, notes there were a lot of winning tech stocks in 2021. She sees “Ad-tech, Cloud, and AI [as] the trends that will drive the tech growth story.” This plays particularly well for Microsoft (MSFT), Apple (AAPL), Meta Platforms (FB), Alphabet (GOOG, GOOGL), Netflix (NFLX), and Amazon (AMZN).

2021 performance of mega-cap tech stocks

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The combined market cap of these six companies amounts to a massive $10T, which is just under half of US GDP. If you’ve been wondering whether to buy any of these stocks as standalone positions, Caleb and Josh both point out that if you own index funds, target date funds, or have a 401(k), it’s likely these vehicles are already giving you a lot of mega-cap exposure.

 

9. IPOs with Ben Carlson

Another member of the Ritholtz family, Ben Carlson, gave his take on one this decade’s hottest investment topics: IPOs. The founder of A Wealth Of Common Sense and co-host of the Animal Spirits podcast notes many of 2020 and 2021’s IPOs “didn’t come shooting out of the gate but have slowly gone up since going public.”

IPO investors will almost certainly face increased volatility over the short and long-term. Or as Josh more bluntly puts it: “the biggest winners of all-time put their shareholders through hell periodically.” It should be noted that, as of December 9th, 2021, Doordash’s YTD returns have been cut from 60% to under 15%, while Unity Software has turned negative for the year.

2021 performance of IPOs: Snowflake, Airbnb, DoorDash, and Unity Software

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10. Investors Chasing Performance with Dave Nadig

Is the phenomenon of “buy the dip” taking over? ETF Trends chief investment officer and director of research Dave Nadig can’t think of a better example that disproves we’re all sheep “chasing the hot stock” than KraneShares China Internet ETF (KWEB). Since December of last year, KWEB’s value has fallen by 33% while AUM grew 2.5x. 

Though potentially an outlier in Josh’s view, Nadig says it still shows how “ETFs can serve so many audiences, for so many different reasons.”

2021 performance and assets under management of KraneShares China Internet ETF (KWEB)

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11. The Metaverse, with Rita Cheng

Did you think “The Metaverse” was just playing video games on an Oculus headset in your living room? Think again, says Rita Cheng, CEO at Blue Ocean Global Wealth. In her view, “the Metaverse refers to vast interconnected virtual communities where we can connect and collaborate for work and play,” using augmented reality glasses and smartphone applications in addition to VR headsets.

Like the Metaverse stocks were in 2021, Josh is bullish on the space and predicts 2022 is the year where VR companies match consumer enthusiasm with new hardware.

2021 performance of "Metaverse" stocks Activision Blizzard (ATVI), Take Two Interactive (TTWO), Roblox (RBLX), Unity Software (U), and Electronic Arts (EA)

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12. Cryptoassets with Tyrone Ross

No recap of 2021 would be complete without touching on cryptocurrency. And what better person to share the future of cryptoassets than OnRamp Invest Co-Founder and CEO Tyrone Ross, who told YCharts back in June that he is particularly bullish on Ethereum. He sees ETH “providing the infrastructure to build the future of global capital markets” and “disrupting wealth management as we know as the AUA [of cryptoassets] explodes over the next 5 years.”

Josh can confirm this after having hundreds of conversations with institutional managers. Though Congressional regulation is expected in 2022, major “battleships” such as JPMorgan (JPM) and Bank of America (BAC) turned to crypto in 2021, and “the dam has broken,” he says.

2021 performance of Ethereum price and market capitalization

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13. Electric Automakers, with Nikki Dunn

CFP and founder of the She Talks Finance investing program, Nikki Dunn is riding with early-stage EV companies who are “gaining massive market caps that rival (or are on the way to rivaling) the largest vehicle manufacturers.” 

Notably missing from the following chart is Tesla (TSLA). Though she acknowledges Tesla’s massive run in 2021, Dunn asserts the company has “set the stage for risk taking in EV stocks and it doesn’t seem to be slowing down yet.”

2021 performance of electric vehicle makers Rivian Automotive, Lucid Group, Toyota, and General Motors

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14. Retail Investors and Meme Stocks, with Ramp Capital

To put a bow on 2021, Ramp Capital gave a take on arguably the most interesting story of the year: meme stocks. According to Ramp, the meme stock revolution revealed two things: “narratives drive everything,” and “a shift has occurred in the way people—including hedge funds—analyze stocks.”

Shopping mall anchors turned meme stock poster children GameStop (GME) and AMC (AMC), are still overvalued based on most traditional valuation metrics. But the fact they remain at these levels nearly a year later signals there’s “a new generation of investors taking the reins”, says Josh. YCharts’ Caleb Eplett bets plenty of hedge funds have added Reddit to their algorithms as well.

2021 performance of meme stocks GameStop (GME) and AMC Entertainment (AMC)

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What Should Advisors and Investors Expect in 2022?

It’s hard to believe 2021 has already come to a close. What’s even more perplexing is how radically different the year’s actual top trends look relative to what was predicted at the start of 2021

A favorite Wall Street quote of Josh’s sums it up: “Just when you think you have the key to the stock market, they change the locks.” Though the keys to investing in 2022 might appear to fit the locks right now, they are bound to change in some ways next year. 

As Sean Brown, CEO of YCharts and webinar MC extraordinaire often quotes: “No battle was ever won according to plan, but no battle was ever won without one.” – Dwight D. Eisenhower

 

Here’s to 2022!

 

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