2021 was an exceptional year for US stocks. S&P 500 companies are projected to see sales and earnings growth of 16% and 45% respectively in 2021 (year-over-year). These growth figures were well above expectations and propelled US equity indices up 20-30% for the year. It was a different story for bonds. The Federal Reserve’s announcement that it would reduce its bond buying program and raise interest rates led to high quality bonds posting flat to negative returns for the year. 2021 also saw consumers flush with cash (total US household wealth increased by 50% since March 2020). This abundance of cash, combined with labor shortages and continued supply chain issues, resulted in a steady increase in inflation to 7% year-over-year in December 2021 – the highest level seen in 40 years.
Continue reading for more 2021 year-in-review insights, as well as our 2022 investment outlook.