Before we get to the new year, let’s take a moment to send off 2021. First, we thank you for your continued partnership. As we grow and evolve our firm, we look back over the years and decades and are so very grateful for our relationships with you all. It’s a privilege to be a part of your lives, to see you achieve your goals and keep your families safe and happy. We are always here, with your best interests at heart, to help in any way we can.
The Year in Review and the Positioning for 2022
Last year started with vaccine rollouts, a recovering economy, and the projection that the 10-year Treasury would hit 2% by year-end. Instead, we got inflation, more inflation, and a Treasury bond that peaked early and then struggled to close the year a hair above 1.5%.
And through it all, the equity markets just kept setting new records. Despite some volatility towards the end of the year, the S&P 500 ended at 26.89%. Besides the performance, the most notable feature is that it outperformed both the Dow and the Nasdaq – by a lot. This has happened in only six other years 1984, 1989, 1997, 2004, and 2005. Before you start Googling to find out what happened in the years following the unusual outperformance – we’ll save you the trouble. While there are a lot of technical comparisons to be made, the ongoing recovery from the pandemic will likely make 2022 look different.
We’ve definitely entered a new phase, with the Federal Reserve acting to end the tapering of quantitative easing three months sooner than expected so that they can fit in not one but three rate increases this year. The current guidance is that it will be followed by three more increases in 2023 and two increases in 2024 so that short-term rates will end in 2024 at just over 2%. However, the Fed has reiterated that it is committed to following the data so that further economic downturns could slow this process.
The sea change in monetary policy to quickly get inflation under control means that we’ll likely see rising interest rates, as well as inflation spikes. And don’t forget the ongoing supply chain disruptions. In other words, while the Fed has a plan to guide the economy to a smooth landing, there’s potential for further in-air turbulence – in other words, volatility. This will likely affect the bond and stock markets alike. It may also continue to disrupt the negative correlation between stocks and bonds investors have built into their portfolios for the last couple of decades.
What to do? Stay focused on your long-term goals, have a look at your overall financial diversification picture, and re-assess your risk tolerance. As always, we’re here to answer any questions.
Update on Dewitt
We are continually building our firm’s capabilities so that we may serve you better. Coming up in 2022, we are adding even more financial planning resources. We want to work with you at every stage, whether you are still in the hectic mid-career with a younger family or you’re somewhere on the retirement spectrum, from thinking about the transition to living in retirement. We’ll be focused on providing more guidance around tax planning, estate planning, and optimizing retirement.
Our Wishes for a Successful 2022
We are very thankful to be part of your financial lives. Seeing you achieve your goals and care for your families inspires us to do our best for you every day. If you would like us to add, fix or change – please reach out. We always want to evolve to bring you the best service we can.
The greatest compliment we can ever receive is when our client family members think that we can be of service to other people they care about. We are always happy to have a conversation with anyone you would like to recommend us to.
Happy New Year!
