2017 has been an interesting year for the financial markets. Stocks in the developed countries have broken records, currencies that lagged in the previous year jumped, and commodities are in recovery mode. All this has happened while volatility has remained at a record low.
In this article, I will look at some of the best trades for the year.
The biggest winner this year has been cryptocurrencies. Bitcoin, which has gained by more than 1,500% has received the most headlines. However, other cryptos have done better. For example, Ethereum has gained by more than 7000% while Litecoin has gained by more than 4000%.
In the coming year, traders will watch out for the performance of these currencies. This week, CBOE started issuing Bitcoin futures and South Korea started exploring lifting its ban on cryptocurrencies.
Some commentators have called these cryptos a bubble which will burst. Others have made higher projections. For example, Social Capital’s CEO – one of the top venture capitalists – has forecasted that bitcoin could reach $1 million by 2020.
Palladium is hardly talked about. Yet, it is the best performing metal this year. It has gained by about 43%. For starters, palladium is a metal similar to platinum. It is mostly mined in South Africa and Russia. Its dense quality makes it ideal for catalytic reactions in the vehicle manufacturing. Its rise is attributed to its cheap price compared to platinum which is currently $889 per ounce.
In the coming year, palladium price could fall for two reasons. First, now that it is expensive, manufacturers could move from palladium to platinum which is currently cheaper. Second, the overall demand could reduce as vehicle manufacturers move to electric vehicles.
Copper has been a big winner too. This year, its price has moved up by more than 20% buoyed by the demand from vehicle manufacturers. Electric vehicles require ten times the amount of copper than combustion engine vehicles.
Other commodities that have gained this year are Gold and Nickel. Commodities like Coffee, Cotton, and Silver have dropped.
Euro has been a big winner this year boosted by economic stability in the European Union. This year, it has moved from 1.0402 to 1.1749 against the dollar and from 0.8363 to 0.8805 against the pound.
The pound has also gained significantly against the dollar. It has moved from1.2497 to the current 1.3347 with Brexit and local politics taking toll.
Among the largest economies, the dollar has been a major loser. The dollar index has lost more than 8%.
In the United States, the major indices have soared with the Dow gaining by 22%, S&P 500 by 17.4%, and the Nasdaq composite gaining by 25%.
Other Global indices have also done well. Hong Kong’s Hang Seng has gained by 30.7%, Europe’s MSCI index by 23%, and Japan’s Nikkei by 19%.
Some of the biggest stock winners among the large American companies are NVIDIA which has gained by 113%, Square which has gained by 200%, Micron which has gained by 109%, PayPal by 86%, and Apple which has gained by about 50%.
A common disclaimer in finance is that past performance is not always an indicator of what will happen in future. An interesting strategy many people have used is to buy the top underperformers and short the outperformers. This time, it could work but there are chances that it might not.