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Energy and real estate sectors end tech dominance in 2021 with 32% average returns

Energy and real estate sectors end tech dominance in 2021 with 32% average returns

Despite being a casualty of the coronavirus pandemic in 2020, the energy sector has flipped its fortunes to record the highest returns in 2021. 

The sector’s gains stand at 36.8%, followed by real estate at 28.01% on a year-to-date basis. On average, the two sectors have registered returns of over 32% to end the tech dominance of 2020.

In 2021, the tech industry has registered returns of 27.56% to rank in the third spot. Interestingly, despite the rising inflation fears, the stock market has generally shown resilience, with all sectors recording positive returns partly due to support from the Federal Reserve stimulus measures. 

Stock sector performance in 2021. Source: Finviz

The energy sector’s positive performance has been aided mainly by the continuing demand for oil, natural gas, and coal, pushing the prices of the commodities high. The demand was inspired primarily by the lifting of lockdown measures due to the rollout of vaccines.

Elsewhere, in 2021, the real estate sector rebounded after emerging from an arbitrary shutdown of business due to the pandemic resulting in a cash flow resurgence.

Worth noting is that several market analysts believe real estate will continue performing better even if inflation continues to soar. As reported by Finbold, Briton Hill, president of asset management firm Weber Global Management believes the sector is well cushioned to handle any market shock emanating from rising inflation. 

Possible drivers for dethroning of the tech sector 

Elsewhere, the tech sector began the year building on the strong 2020 gains that saw products of various companies being utilized to help people manage the imposed lockdowns. The sector benefitted from demand around remote work technology, home workouts, food delivery and tech-based entertainment. However, the demand lessened with the reopening of the economy. 

The main undergoing for the tech sector has been the declining value of companies that picked up huge market caps in 2020 but were later abandoned by investors in 2021 as stay-at-home practices eased in various parts of the world. For instance, video conferencing platform Zoom (NASDAQ: ZM) market capitalization has plunged by over 40% in 2021. 

It is worth noting that tech has managed to hold the third spot thanks to big players like Apple (NASDAQ: AAPL) and Microsoft (NASDAQ: MSFT), which have mainly sustained their growth. Consequently, as reported earlier by Finbold, analysts expect Apple to surge further in 2022. 

Dan Ives, an analyst at investment firm Wedbush, projects that Apple will hit over $3 trillion in market capitalization by the end of 2022, mainly due to increased demand for its products.

Will the market crash in 2022?

Moving into 2022, the focus will be on how the sectors perform in the wake of the Federal Reserve tapering. However, some analysts are projecting a grim outlook for the markets. 

As reported by Finbold, businessman and author of the personal finance bookRich Dad Poor Dad,” Robert Kiyosaki had warned investors to prepare for a significant market crash and depression due to what he termed as fake inflation figures being fronted by the Fed.

Furthermore, American trend forecaster Gerald Celente warned that 2022 would come with the ‘biggest crash in world history’ triggered by the Fed tapering measure. Celente cited increased inflation due to the Fed raising interest rates as the primary trigger for the crash.

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