2021 Lookback

2021 was a fizzing mints-in-soda kind of year. As we head into the new year, let’s a look back at 2021.

• United States’ economic growth was stronger than it has been in decades. In December, The Conference Board estimated the U.S. economy grew by 6.5 percent annualized in the fourth quarter of 2021, and 5.6 percent over the full year. That’s the strongest growth in decades, according to Ben Levisohn of Barron’s. The publication reported the lesson of the last century is, “Don’t underestimate the resilience of the U.S. economy.”

• Inflation rose faster than it has in decades. Consumer prices increased at the fastest pace since 1982. By December, prices were up almost 7 percent for the year in the U.S., according to The Economist. As rents and wages increased, the Federal Reserve changed the language it used when discussing inflation, removing the word “transitory.” Some economists say inflation will subside in 2022, while others believe it will be more enduring, according to a report from Goldman Sachs.

• Consumer sentiment declined and then rose in December. Overall, consumers were less optimistic during 2021, largely because of inflation. About 25 percent of households said inflation was eroding their standard of living.

In December, however, optimism moved sharply higher “…primarily due to significant gains among households with incomes in the bottom third of the distribution. Indeed, the bottom third expected their incomes to rise during the year ahead by 2.8%, up from 1.8% last December,” That’s the biggest gain in 22 years.

• The Federal Reserve took a hawkish turn. As inflation persisted, the Fed decided to accelerate monetary policy tightening by tapering bond purchases more quickly than expected. In December, 12 of the 18 Federal Open Market Committee members indicated they anticipate at least three rate hikes in 2022. The increases would lift the Fed funds rate from zero to 0.25 percent to 0.75 to 1.0 percent.

• Major U.S. stock indices set record after record. After trading closed on December 31, 2021, “All three major U.S. stock indexes scored monthly, quarterly and annual gains, notching their biggest three-year advance since 1999,” reported Stephen Culp and Echo Wang of Reuters.

• Corporate earnings proved resilient. Despite supply chain issues, labor shortages, wage increases and inflation, U.S. company earnings were exceptional. Earnings, which reflect company profits, were up 45.1 percent year-over-year. That’s well above the trailing 10-year average annual earnings growth rate of 5.0 percent.

• Finding income in the bond market was challenging. “Emerging-market bonds were supposed to be dragged down this year as central banks moved toward withdrawing stimulus. Instead, the best-performing global debt was all from developing nations…South Africa, China, Indonesia, India and Croatia topped the rankings of 46 markets around the world in 2021.

It has been an honor to work with you during 2021. We look forward to seeing you in the new year!

Data as of 12/31/21	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor’s 500 Index	0.9%	26.9%	26.9%	23.9%	16.1%	14.1%
Dow Jones Global ex-U.S. Index	1.0	5.7	5.7	11.0	7.3	5.0
10-year Treasury Note (yield only)	1.5	N/A	0.9	2.7	2.5	2.0
Gold (per ounce)	0.0	-4.5	-4.5	12.1	9.4	1.2
Bloomberg Commodity Index	0.3	27.1	27.1	8.9	2.9	-3.6