Market Overview

Recap

  • 2021 was another stellar year for U.S. equity performance, with the S&P 500 returning a resounding 28.7%;

  • Once again, U.S. large-cap equities significantly outperformed international developed market equities by over 16% in 2021;

  • As interest rates rose throughout the year, the Bloomberg Aggregate Bond index posted its first annual loss since 2013, losing-1.54%;

  • During Q4, the real estate and technology sectors posted the largest returns, gaining 17.50% and 16.69%, respectively;

  • Interest rates, especially short-term rates, rose rapidly during Q4 as expectations surrounding the timing and magnitude of the upcoming interest rate hiking cycle by the Fed were pulled forward and greatened;

  • Inflationary pressures continued to be of concern in Q4, posting the highest increase in over 30 years, with rising energy prices being the most burdensome to consumers;

Outlook

  • Following three years of remarkable returns, we believe investors need to temper their expectations for the performance of U.S. Equities going into 2022;

  • With the Federal Reserve likely to withdraw all accommodation this year, we foresee more volatile equity markets ahead;

  • Our team's economic analysis suggests that the tapering of asset purchases coupled with at least three rate hikes in 2022 point to higher interest rates and a continued flattening of the yield curve;

  • We believe that in 2022, valuations are more supportive of international developed market equities than the overall U.S. Equity market, and therefore an overweight position to the MSCI EAFE Index, where permitted, is prudent going forward;

  • Sector specifically, our equity analysts currently find financials and energy equities as offering the most value at the moment;

High Energy Prices

Energy Prices Rally - CIM

 

Labor Market Recovery Slows

More Compensation to Hold Long Duration Bonds

 

Market Anticipates Tightening by Federal Reserve

First Monthly Loss for S&P 500 Since January

 

 

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