FY21 In Review

For many, today marks the end of the financial year and a time to look back at how everything performed.  Its also a time to take stock of what might be the best place to be invested for the year ahead.  So let’s look back and forward.

First, lets address the elephant in the room and that is the fact FY21 comprised half ‘that’ year we will never forget, 2020, the year COVID hit.  In hindsight we see now that not only was it the biggest economic shock in history, but that the response from central banks and governments alike saw it become one of the shortest lived and most remarkable rebounds on the ticker tape.

Whilst the Aussie ASX200 fell nearly 33% over the end of February and beginning of March 2020, by the start of the financial year, barely 4 months later, the ASX200 had retraced nearly 50% of that loss.  It was a remarkable bounce.  The US S&P500 had nearly retraced all of its similar 32% fall by 1 July!

The ASX200 then reached that previous high of 7139 just last month, 14 months later, whereas the S&P500 blasted past its pre COVID crash high of 3373 by early October such was the speed and ferocity of the US Fed and government fiscal double barrel stimulus.  As we sit here on the morning of the last day of the financial year 2021, the ASX200 is up 24% for the year and the S&P500 an eye watering 38%.  So how does that compare to metals?

Gold rallied strongly after the liquidity squeeze reaching a high of $2870 in August, up 20% from the low and 11% from 1 July.  However the growing belief that everything was fixed, rising bond yields as a proxy for rising real rates, and easing concerns around inflation saw it drift lower right through to March.  It then started climbing since on the opposite of all of those factors, albeit with a relief correction underway right now on the ‘transitory inflation’ narrative.  In the end gold finished the financial year down 9%.

Silver on the other hand was late to the party (as usual) but then blasted past gold (as usual) and has largely maintained its gains.  From the crash low to August high silver jumped an incredible 114%, 60% of that in this financial year.  Whilst gold then languished, silver benefitted from the reflation trade, green stimulus agenda and supply issues to finish the financial year up a strong 29% albeit after giving up a bit in the last couple of weeks like gold.

Platinum was a near identical story to silver and ended the year up 21%

Bitcoin has had a more dramatic year of two halves as well, coming late to the party in October last year before an incredible run up to April this year (up 527%) and the equally incredible correction in May.  That said, BTC is still up 262% for the year.  Not bad in anyone’s books….

And whilst 262% is great, that pales next to Ethereum which ended the year up 779% after being as high as 1507% up in April.

It would be fair to say FY21 is a year that saw the tail end of panic, the surge of optimism on stimulus fueled reflation (bond yields rising), and then the realisation of pending higher (possibly much higher) inflation and doubts about the real sustainability of the recovery (falling bond yields, rising inflation and increasingly negative real rates) and now confusion of whether that inflation is transitory and whether the Fed will start to taper.  We are at a crossroads now for gold where the market is caught up in a short term narrative around inflation and growth without realising in the medium to long term, each scenario sees an inevitable doubling down of monetary stimulus and renewed support for gold, and precious metals in general.  Ultimately you can only blow a bubble so far with stimulus.

We wish you all the best for FY22, it promises to be one where, amongst a lot of confusion, balancing your wealth will be vital.