December market review
Positive fundamentals and supportive seasonality propelled the equity markets to record highs during the month. Both the Dow Jones Industrial Average and the S&P 500 notched new highs in December, with underlying market sectors firmly in the green.
Despite the challenges posed by coronavirus variants and extreme weather events, 2021 saw the best economic growth since 1984, muted market volatility and the S&P 500 delivering a return of approximately 27% over the course of the year. Raymond James Chief Investment Officer Larry Adam expects inflation to peak by early next year, which should alleviate pressure on the Federal Reserve (Fed) in the upcoming tightening cycle and would be supportive of domestic equity markets overall.
A few things of note:
- We saw some volatility amid faltering negotiations to advance President Joe Biden’s Build Back Better legislation. Lawmakers should eventually unlock a deal; however, investors can expect to see short-term economic headwinds in the meantime, and consumer sectors may stumble as the monthly child tax credit payments expire. In addition, clean energy companies in the U.S. market may not be able to count on a decade-long extension of sector-specific tax credits.
- The Fed began to taper the pace of its monthly asset purchases and financial markets seem to have priced in rate hikes sooner than later, most likely around May.
- Expect normal volatility and pullbacks in the year ahead, along with continued sector rotation. Overall conditions are likely to remain healthy, and investors can use these periods to opportunistically and thoughtfully add vetted positions.
If you have any questions about your financial plan, this letter – or anything else – please reach out at your earliest convenience at 910-399-7765.
We hope the buoyant mood of the domestic stock markets carries into 2022 and that you and yours enjoy a healthy and prosperous new year! Thank you for your continued trust in us.
Chad, Brad, Karen and Rebecca
Sound Harbor Wealth Partners
5129 Oleander Dr. ste 202
Wilmington, NC 28403
Investing involves risk, and investors may incur a profit or a loss. All expressions of opinion reflect the judgment of the authors and are subject to change. There is no assurance the trends mentioned will continue or that the forecasts discussed will be realized. Past performance may not be indicative of future results. Economic and market conditions are subject to change. The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The S&P 500 is an unmanaged index of 500 widely held stocks. The performance mentioned does not include fees and charges, which would reduce an investor’s returns.
Material prepared by Raymond James for use by its advisors.