PFA Updates

Another Good Year for the Markets

Dec 20, 2021

Greetings, friends and happy holidays!  As the year comes to a close, we believe we can look back on the stock market and give a "thumbs up" to another positive year.  Depending on the stock index you pick, we have largely seen an above-average year of growth.[1] 

We have noticed that the market had a much faster trajectory in the first six months and now for the second six months, the new COVID-19 variants and the stubbornness of inflation have caused more volatility and a bit less growth than the first half.  Regardless, our Investment Committee is happy with the growth in the markets this year and are hopeful for 2022. 

The markets have been consistent the last few years; 2019, 2020 and now 2021 have all turned in double-digit growth for stocks.[2] That's good stuff and we believe clients with a steady increase in their account balances seem happy.

Bonds, on the other hand, have struggled.  We believe we have navigated around "the potholes" this year and largely avoided the bond sectors that turned negative.  We look for our bonds to bring diversification, stability and income to our investment portfolios and I think we found that balance for 2021. 

 At this point, we do not have plans for any strategic changes to our Investment Models until 2022.  For right now, we are humming the old year-end holiday song, "It's beginning to look a lot like a Santa Claus rally." Cheers to a good 2022 in the markets!  Be safe and be healthy.

My Favorite Quote of the Month

"There are clouds on the horizon, and at some point in the next few years, we may be (temporarily) bullish no more.  In the meantime, let me remind you, the clouds are on the horizon, not overhead.  Equities have further to run."[3]

Regarding the Economy

"We continue to regard the current period of elevated inflation as stubbornly transitory and therefore it will take time for the problem to be resolved, but it will not persist for years."[4]

"Current inflation trends could lead to a glut of inventory in 2022, especially for appliances, vehicles and furniture.  And if consumers are already done with their holiday shopping, it could lead to excess inventory at stores like Walmart, Target and TJ Maxx."[5]

"We remain bullish on equities and the economy.  A bear market or recession in 2022 is very unlikely."[6]

"As earnings season comes to a close, over 81% of S&P500 companies have exceeded their expected financial results.  For the most part, companies have been able to meet high demand and have found ways to navigate labor shortages and supply-chain hang ups."[7]

Regarding the Stock Market

"I think it's too early to bail on equities.  A slow-but-steady Fed seeking to do no harm against a bullish secular back drop should be enough to ensure a soft landing for this earnings cycle and, therefore, a potential continuation of this bull market."[8]

"The S&P Index has the potential to trade into the upper-4,000s range going forward."[9]

We haven't had a 10% correction in 2021, and although we never try to time the market, we wouldn't at all be surprised by one happening at some point in 2022."[10]

"Our year end 2022 call for the S&P500 is 5,250 and we expect the DJIA to rise to 40,000."[11] 

[1] 2021


[3] 12/21

[4] Marketimer newsletter, 12/3/21

[5] 11/23/21

[6] 11/22/21

[7] 12/20/21

[8] Jurrien Timmer, Fidelity advisor newsletter, 11/29/21

[9] Marketimer newsletter, 12/3/21

[10] 12/13/21

[11] 12/13/21

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