As we head into 2022, there is much to be optimistic about. More than you may think… With much of the media attention focusing on Covid strains and political battles, it’s easy to ignore or miss these positives:
From a market perspective, nearly every major equity index is at or near its all-time high. Translated… We made money…
Bonds, which most analysts predicted would get demolished, have held up for the most part. So, the dreaded inflation monster hasn’t broken up the party just yet.
These returns have led to great overall portfolio returns and increased investor optimism for even conservative individuals.
This optimism typically leads me to be a pessimist on markets, however, Ed and I agree, that we could see things trend higher over the next 6-12 months. These little bouts of mini meltdowns have worked to flush out much of the rampant speculation you normally have at this stage of a bull market.
From a portfolio perspective, we remain neutral/balanced.
On the economic front, there is more positivity to pull from.
Housing prices near all-time highs
Wages near all-time highs
Unemployment is near all-time lows
Interest Rates/Borrowing Costs near all-time lows.
These conditions are great for most Americans.
Two-thirds of our country own a home, which now, due to increased home prices and low mortgage rates, has created more equity for homeowners than ever before.
With unemployment falling to nearly 4% and employers still looking for workers, wages have lifted and become much more competitive. Especially helping those lower-wage earners. We do see coming “wage push inflation” down the road but that’s a topic for another rant.
These are all tailwinds that have contributed to better balance sheets for most Americans and a huge increase in demand throughout the economy. Couple this demand with the current supply chain issues and you can start to see how Inflation has reached this point. As we’ve written over the past few months, inflation does have the ability to erode a lot of the above-mentioned positivity. This is something to watch in the coming year (and beyond) as we recover from the Covid induced economic dislocations. Unfortunately, in the short run, inflation will continue to act as a tax on all Americans.
In closing, I wish you and yours a great start to the new year. May 2022 be a little less stressful and a little less dramatic than 2021. As always, don’t hesitate to reach out if you need anything at all.