Economic and Market Outlook

  • The presentation opened by noting there were 70 all-time highs set by the S&P 500 in 2021.
  • In 2021, stock performance was stronger than we expected and bond performance was a bit weaker. Inflation began to rise as we headed through the year.
  • Ahead of 2022’s elections, we spoke to the average stock market path each month. First, we examined mid-term years which are generally fairly flat up until near the day of voting and then rise through the remainder of the year. This contrasts to all other years, which on average slope upward the twelve calendar months.
  • Our outlook called for another positive year for stocks and a negative year for bonds owing to the trends with inflation.

The S&P 500 had 70 record high closes in 2021. An acceleration in economic growth provided a nice backdrop and tailwinds for corporate earnings. As the U.S. and the rest of the world emerged from Covid, and given all the fiscal and monetary stimulus of the prior year, we started 2022 in strong shape.

At the start of this year, the consumer, business and state and local government balance sheets were strong. The only hot mess from a solvency standpoint remains the U.S. Federal Government. Our outlook was that against this strong foundation, especially for consumers and businesses, that 2022 would still favor growth assets.

We stated our belief that inflation would peak in 2022 and also noted that geopolitical risks (Russia and China most notably) and volatility would remain high. Nonetheless, our perspective was to remain overweight stocks relative to bonds.