2021 - Year in Review

Despite coronavirus variants, supply chain issues and an inflation spike, equity markets surged forward in 2021, specifically in domestic markets which set numerous all-time highs.  In fact, on a total return basis the S&P 500 had 75 instances where it closed at a new record high. This is quite remarkable when not many forecasters predicted a 25+% return for the S&P 500 this time last year.

Ignoring the volatility of meme stocks and cryptocurrencies, the year was a calmer ‘roller coaster’ than 2020 as not much volatility occurred in the stock market. Each time the market dipped slightly it bumped right back up. The largest peak to trough S&P 500 decline for the entire year was about 5%. To put that into context an average intra-year decline is around 14%.

The year 2021 was one that emphasized the benefits of perseverance in uncertain times. Unforeseen challenges are in front of us, but as we enter 2022 looking backward can help as we look to the future.

Only three times in history has the S&P 500 had three years of double-digit returns to be followed by a fourth year of double-digit returns. The last three years of the S&P 500 were double digit returns: 2021 – 26.8%, 2020 – 16.2%, and 2019 – 28.8%.  It is possible 2022 can continue the streak, but as you know past performance is no guarantee of future results.

Secular bull markets, those years long and even decades long advances in the market can still have short term setbacks. A short term, even steep, decline like we saw in 2020 does not necessarily signal an end to the conditions that created the bull market in which we long-term investors prosper.

We wish you and your family a very happy 2022.