First and foremost, I hope everyone had a safe and enjoyable Holiday. I can’t believe we are now in 2022.
We closed out the year with another strong month of gains in the domestic equity markets with the S&P 500 jumping over 5% and the Russell 2000 over 4%. Major Foreign markets rose in December with the Nikkei and FTSE 100 up over 3%, The Hang Seng was the notable underperformer dropping over 2%.
The charts below highlight domestic major stock indexes and their corresponding changes and their quarterly returns. The second chart is sector driven highlighting the best performers in 2021.
These charts reinforce our investment philosophy. A well-diversified portfolio that is consistently rebalanced is the best course for long term capital appreciation.
All eleven sectors posted double-digit returns led by Energy (+54.4%), REITs (46.1%), Financials (+34.9%), and Technology (+34.5%). Energy and Financials were the only two sectors in the red for 2020. According to data compiled by Bloomberg going back to 2001, this is the first time all eleven sectors posted double-digit gains.
The graph below shows TYD returns for some of the largest stock markets around the world.
Crude Oil reversed its November sell off rising 17% in December, closing the year over 60% higher from the close of business in December of 2020. Natural Gas was 20% lower in December but still is up over 40% in 2021.
The Omicron Variant and the rapid spread of the virus has not given the markets great concern as investors do not expect additional shutdowns.
As we look forward to 2022, we are very focused on inflationary pressures. The Federal Reserve combats inflation with higher rates. Bond prices have an inverse relationship with yields. As rates go higher, prices on fixed rate bonds drop.
Negative annual returns in US Treasuries are rare. The Bloomberg US Treasury Index was down 2.5% in 2021, its first slump since 2013. It’s never fallen more than 2 years in a row stretching back to 1974. There are approximately 3 fed rate increased priced in 2022, and an additional 2 in 2023.
We are concerned that traditional interest rates hikes will not be the cure to inflation in the US. Higher energy prices and Government stimulus add to inflationary pressures but are not interest rate driven.
Additionally, labor pressures are creating significant inflationary tailwinds. As you can see from the 1-year chart below the US job quit rate is the highest on record as 4.5 million Americans left their jobs in November while job openings remain elevated.
As we go into 2022, we continue to look for increased volatility in both bond and stock markets. Market volatility is common and it’s our responsibility as advisors to navigate our clients during these turbulent times.
When we invest for our clients, we are long-term investors, not traders. It is important not alter long term plans and become active traders to time markets. We feel the key to long term success is a balanced portfolio that is rebalanced over time to ensure proper risk allocation.
Each client’s risk tolerance and long-term objectives are different, and we are committed to the achievement of our clients’ long-term goals.
As always if you have any questions feel free to reach out.
This material is intended for general public use and is for educational purposes only. By providing this content, Park Avenue Securities LLC is not undertaking to provide any recommendations or investment advice regarding any specific account type, service, investment strategy or product to any specific individual or situation, or to otherwise act in any fiduciary or other capacity. Please contact a financial professional for guidance and information that is specific to your individual situation. Russell 2000 Index measures the performance of the smallest 2,000 companies in the Russell 3000 Index of the 3,000 largest U.S. companies in terms of market capitalization. The Hang Seng Index is a free float-adjusted market-capitalization-weighted stock-market index in Hong Kong. S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market. NASDAQ Composite Index is a market value-weighted index that measures all NASDAQ domestic and non-U.S. based common stocks listed on the NASDAQ stock market. Each company's security affects the index in proportion to its market value. Indices are unmanaged, and one cannot invest directly in an index. Past performance is not a guarantee of future results. All investments contain risk and may lose value. Investing in the bond market is subject to certain risks including market, interest rate, issuer, credit and inflation risk. Equities may decline in value due to both real and perceived general market, economic and industry conditions Opinions expressed are those of the author and not necessarily those of Guardian or PAS. 2021-124911 Exp 8/22
Jeremy has been in the financial advisory business since 2005 after graduating from Fordham University’s School of Business. He joined Tomoro as a managing partner in 2014. During his tenure, Jeremy has consistently excelled as an advisor in both the personal household and business planning arena. As a managing partner, Jeremy also serves as a mentor to all associates and is hands-on in supporting Tomoro’s growth planning. He has completed various curriculums and certifications, such as New York University’s graduate studies in financial planning, is a Certified Exit Planning professional, and Investment Advisor Representative. He and his family reside in Colts Neck, NJ.
Registered Representative and Financial Advisor of Park Avenue Securities and Financial Representative of Guardian, AR insurance license #8401385 CA insurance license #0F94382
The S&P 500 Index is a market index generally considered representative of the stock market as a whole. The Index focuses on the large-cap segment of the U.S. equities market. The Hang Seng Index (HSI) is a market-capitalization-weighted stock market Index in Hong Kong. It is used to record and monitor daily changes of the largest companies of the Hong Kong stock market and is the main indicator of the overall market performance in Hong Kong.
Indices are unmanaged, and one cannot invest directly in an index. Past performance is not a guarantee of future results. All investments contain risk and may lose value. Investing in the bond market is subject to certain risks including market, interest rate, issuer, credit, and inflation risk. Equities may decline in value due to both real and perceived general market, economic, and industry conditions.
Statistics sources from Central Bank Rates and Bloomberg.