Another Record
The US stock market continues to surprise, closing out 2021 with another strong quarter. The S&P500 rebounded from a rough September and moved steadily upward until late November, when concerns about the COVID-19 Omicron variant led to a brief decline. December rallied back to end the year just shy of an all-time high. 2021 marks the third year in a row of strong US stock market gains.
International markets once again trailed the US. Global equities experienced a similar rise in October and November before the Omicron scare sell-off. December’s recovery was just enough to move international stocks into positive territory, finishing out the quarter with a gain of 2.69%.
After a very strong 2020, fixed income investments struggled throughout 2021. The early rise in interest rates hurt bond prices during the first quarter, but thankfully stabilized soon after. Fourth quarter saw relatively little movement, as rates oscillated within a small range and ended up nearly unchanged. As we look to 2022, it is encouraging to note that very rarely are there two consecutive calendar years of negative bond returns. In fact, we have not seen that occur since the 1950s.
The overall theme of the quarter was one of generally improving economic fundamentals, driven by the continued wave of consumer demand. The most recent data shows consumer confidence is up, personal spending increased for the ninth consecutive month, and durable goods orders rose more than anticipated. Given the continued labor market recovery and labor shortages in some areas, personal income growth will likely continue as well.
Fears of inflation continue to persist but should moderate as the global supply chain begins to catch up. The Federal Reserve has started to shift its policy; reducing its monthly bond purchases, and setting the stage for potential rate increases in 2022. Those moves should aid in combating inflation, should we see further increases. Medical and policy risks remain the other areas to watch as we move into the new year.
The Infrastructure Investment and Jobs Act was signed into law in mid-November, bringing with it a massive investment into the country’s infrastructure. Those funds will make their way to communities and businesses over the next few years as wide-ranging projects addressing roads, lead pipes, broadband, and more are untaken.
We hope you had a wonderful time over the holidays and wish you a happy, healthy, and prosperous 2022.
As always, please let us know of any questions or concerns.
The PWM Team
