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Happy New Year
"In the business world, the rearview mirror is always clearer than the windshield." - Warren Buffett
This observation is equally true in the investment world.
In 2021, we saw the worst performing areas of the market from 2020 do the best in 2021, while the best performers from 2020 did the worst in 2021.
Hindsight is 2021
Source: Bloomberg and Goldman Sachs Asset Management. As of December 31, 2021
In addition to the broad asset categories above, styles & factors exhibited the same results. In 2020, Momentum was #1 and dead last in 2021, while Value was dead last in 2020 and #1 in 2021.
2021 saw a transition from a vaccine-fueled and policy-led recovery to a more fundamentally-driven expansion. Market performance remained fairly strong, even amid supply chain disruptions, meme stock mania, and ongoing virus concerns.
The new year begins with the US economy on sound footing. True, the Covid-19 pandemic continues to present challenges as we start 2022. Even so, consumers have proven resilient in the face of these health concerns, getting back to traveling and continuing to spend at a brisk level. Household net worth is at an all-time high, while debt service ratio (debt payments as % of disposable income) is at a 40 year low. While interest rates are likely to rise during the year, they remain quite low on a historical basis. Unemployment is falling and wages are rising. Inflation is a major concern, especially as it exacerbates the income inequality problem we already have. We have Congressional elections in November and ongoing geo-political risks with Russia and China. And let’s not forget Mother Nature continues to wreak havoc across the country.
In 2022, we expect growth to moderate, monetary policy to prioritize taming inflation, and fundamentals to continue driving returns. We expect volatility to remain elevated. We continue to favor equities over bonds, and the US over International.
It will be interesting to find out how clear our windshield will be this year!`
We appreciate your confidence in us and will do our very best to help navigate this new year and whatever it may bring.
January Calendar of Events (comments and additions for future months are always welcome)
January 5th My granddaughter Isys turns 16. I must be getting old.
January 10th My wife Elle’s birthday.
January 15th 12th anniversary of my independent practice – thank you to all my great clients.
January 17th Martin Luther King Day. Let’s pray for more racial tolerance and understanding.
Sources: Value Line, Bloomberg, Goldman Sachs
Although information herein has been obtained from sources deemed reliable, its accuracy and completeness are not asserted. All opinions and estimates included in this report constitute the judgment of the financial advisor as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.
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