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New Year and New Beginnings

With a new year comes new beginnings and a closing of old chapters. We review market headlines and performances of 2021 as well as preview the 2022 outlook of not-so obvious themes we might expect.

2021 Review

U.S. stocks finished their final trading session of the year Friday, capping off a record-setting 2021 for the major averages which posted double-digit returns this year. Despite the persistent headwinds of Covid-19 (and it’s variants) the global economy began its recovery from the 2020 Covid lockdowns, while the Federal Reserve maintained supportive measures first implemented at the onset of the pandemic:1

  • The S&P 500 rose 26.89% in 2021
    • This marks the benchmark’s third straight positive year.
  • The Dow Jones Industrial Average rose 18.73% in 2021
    • This marks the benchmark’s third straight positive year.
  • The Nasdaq Composite rose 21.39% in 2021
    • This marks the benchmark’s third straight positive year.

Other interesting facts, and records, from the markets' performances in 2021

  • The S&P 500 notched 70 record closes this year, the second-highest annual tally behind 1995′s 77 closing highs.
  • The record closes occurred frequently. The S&P 500 has posted at least one new record close every month since November 2020. The longest span without a new high in 2021 was 33 trading days between record closes on Sept. 2 and Oct. 21.1

The stellar year for stocks came even as the Covid pandemic continues on, with variants like delta, and now omicron leading to case outbreaks throughout the year. 

2022 Outlook

After a stellar 2021, stocks head into the 2022 with a tailwind of momentum, but the course of the market in the new year will depend more on solid earnings growth and a strong economy rather than an accommodative Federal Reserve.

With Monday’s opening bell, the clock starts on a quarter that could see the first Fed rate hike since 2018. In the bond market, worries about the latest omicron Covid-19 variant could give way to an investment more intent on a reset of expectations for where interest rates are heading over the course of 2022. 

2022 Not-So Obvious Themes 

Our not-so obvious themes we’re guiding our clients through in 2022:

  1. Expect strong but slowing economic growth in 2022.
  2. High inflation should persist in 2022, but could deflation derail inflation?
  3. It’s a good time for balance and get ready for volatility in this midterm election year.
  4. Bonds can still do well in rising rate environments.
  1. https://www.cnbc.com/2021/12/30/stock-market-futures-open-to-close-news.html