Fourth Quarter 2021 Executive Summary

It was another year for the history books as equities continued to rally in the fourth quarter, hitting new all-time highs.  Despite considerable headwinds (i.e., political/governmental uncertainties, rising inflation, resurgence in Covid), all four of the major U.S. indices ended the fourth quarter in positive territory.  When all was said and done, government policy remained supportive of the economy, progress was made battling the pandemic and corporate earnings growth was strong.  

As we turn the page on the calendar, we expect a less remarkable year, with more normalized economic growth (as we continue to adapt to the pandemic and pent-up demand hits the economy), market appreciation more likely in single digits (as companies report positive but more normalized earnings), and a calming of inflation (as supply disruptions dissipate).

Fundamentals remain strong.  Unemployment is down.  Wages are up.   And businesses and individuals alike have cash to deploy.  And while inflation remains a key risk, and we’re not out of the Covid woods yet, we are looking forward to a positive, but less historic, 2022.  

As we reflect on navigating history in the making these past years, we are reminded of the importance of staying the course.  It has been a wild ride.  And while the extremes we’ve faced have been nerve-racking, the experience has validated our focus on fundamentals and adhering to a disciplined, long-term investment strategy.  And so, as 2022 gets on a roll with whatever ups and downs it may have in store, remember that you have shown you can weather the storm.  You are up for the joys and the challenges, and as always, we’ll be with you each step of the way.  Live life to the fullest. Enjoy the little things … and the big.  Cherish your loved ones.  We join you in looking forward to times yet to come and wish you a healthy, happy, and prosperous year, filled with good times and treasured family and friends.

What a wonderful thought it is that some of the best days of our lives haven’t happened yet.  - Ann Frank

Recent Economic Data: 

Gross Domestic Product (GDP).  The GDPNow model estimate for real GDP growth in the fourth quarter of 2021 increased to 5.1% (seasonally adjusted annual rate; estimate released 01/19/2022), after increasing only 2.3% in Q3.  

Unemployment.  The unemployment rate declined to 3.9% in December, down from 4.8% at the end of Q3 and dropping below 4% for the first time since the start of the pandemic.  A record 6.4 million jobs were added to the U.S. economy in 2021, an extraordinary rebound from unprecedented pandemic-related losses the previous year. 

Consumer Confidence.  The Conference Board Consumer Confidence Index, an indication of consumer attitudes and buying intentions, now stands at 115.8 (1985=100), up from the end of Q3, as concerns regarding inflation and the emergence of the Omicron variant eased.   

Consumer Price Index (CPI).  The CPI for All Urban Consumers (CPI-U), a measure of inflation which shows “cost of living” fluctuations, increased 0.5% in December on a seasonally adjusted basis, and for 12 months ending December the CPI-U increased 7.0% before seasonal adjustments -- its highest reading in 40 years.

Earnings.  For Q4 2021, the estimated earnings growth rate for the S&P is 21.7%, capping off a year of remarkable growth.  If the estimate holds, this will mark the fourth consecutive quarter of earnings growth greater than 20%.  

Housing.  Privately-owned housing starts in December were at a seasonally adjusted annual rate of 1,702,000, 2.5% higher than December 2020.  Builders’ confidence remains high despite rising costs.  The median price for a home in the U.S. rose nearly 20% in 2021.   We expect low inventory and high buyer demand to continue to fuel the housing market.

We are committed to serve you with the highest standard of care in keeping with our corporate mission of 

Building Relationships … Enhancing Lives.

 Executive Summary Sources:

https://www.marketwatch.com/story/dow-futures-trade-flat-as-stock-market-hunts-for-further-gains-in-2021s-final-sessions-11640780437

https://www.atlantafed.org/cqer/research/gdpnow

https://www.bea.gov/news/2021/gross-domestic-product-third-estimate-gdp-industry-and-corporate-profits-revised-3rd

https://www.bls.gov/news.release/pdf/empsit.pdf

https://www.conference-board.org/topics/consumer-confidence

https://www.bls.gov/news.release/archives/cpi_01122022.htm

https://www.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_010722A.pdf

https://www.census.gov/construction/nrc/pdf/newresconst.pdf

https://www.morningstar.com/indexes/dji/!dji/performance

https://www.morningstar.com/indexes/xnas/@cco/performance

https://www.morningstar.com/indexes/spi/spx/performance

https://finance.yahoo.com/quote/%5EIXIC/history?p=%5EIXIC

https://finance.yahoo.com/quote/%5EDJI/history?p=%5EDJI

https://finance.yahoo.com/quote/%5EGSPC/history?p=%5EGSPC

The views expressed represent the opinion of Asset Management Financial Solutions, Inc. (“AMFS”) and are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and AMFS’s view as of the time of these statements.  Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties.