As for global markets in 2021, what a year! The S&P 500 grew about 29%, the Dow Jones Industrial Average was up about 21% and the NASDAQ rose about 22%. International Equities struggled to keep up with their US counterparts in 2021 but still rose by about 7%. Unfortunately, Investment-Grade Bonds (represented by the Bloomberg Aggregate Index) detracted from portfolio performance losing about 2% on the year. As a former colleague once coined, 2021 showed “diworsification” as the S&P 500 was the best game in town.
As we look out into 2022, there are two major themes for investors – inflation and the transformation from a pandemic to an endemic disease.
Inflation may remain a concern for some time which could cause the Federal Reserve to raise interest rates faster than the market expects. Therefore, we have been aligning our portfolios to overweight companies that have quality earnings and pricing power to pass along price increases to the consumer. In terms of COVID-19, it appears to be more and more evident that COVID-19 may look more and more like influenza as an endemic disease and will remain a health concern into the future. As COVID-19 (depending on the variety of strains) becomes more common place, it may alleviate disruptions in everyday life. Therefore, families and investors may be able to finally take that long awaited vacation or be able to visit with family more often than in the previous two years. We believe this transformation will cause volatility in global equities, but an overall strong backdrop for increased corporate earnings in the years ahead. We want to wish everyone a healthy and a prosperous 2022 that fills all of your life buckets! As always, “you do the dreaming, and we’ll do the math!”