Wow, another year is in the books. As we reflect on 2021 it’s difficult not to think of the past year as 2020’s sidekick. We clearly remember the struggles and challenges our world collectively faced in 2020 but, although 2021 had several challenges of its own, the world and markets proved resilient in 2021.

Overall, domestic equites had a very robust year. The always-watched S&P 500 Index outperformed many economists and market participants expectations in 2021 finishing the year up 28.68%. Trailing not too far behind were the NASDAQ Composite Index and the Dow Jones Industrial Average Index which returned 22.21% and 20.95% respectively. On a relative basis, Growth stocks outperformed Value and, although Small and Mid-caps performed stronger in the first quarter of 2021, large caps outpaced small and mid-cap indexes over the course of the full year. Lastly, on the international side, the MSCI Emerging Markets index and the MSCI ACWI ex US Index returned -2.47% and 8.53% in 2021.

The resilience of domestic equities was especially encouraging for market participants considering the whole of the year was dominated by ominous headlines.

The concern of rising inflation, though, was a common theme across the latter half of 2020 and continues to be a key point of concern for many investors and policy makers. 2021 posted the largest yearly increase in the Consumer Price Index number in nearly 40 years.¹ The congested ports and rising input costs that first reared their heads in 2020 were expected to wean in early 2021 but this hope was suddenly halted in late March as one of the world’s largest container ships lodged itself and blocked access though the Suez Cannel. Although the blockage lasted less than a week’s time, the backlog of cargo ships quickly grew to 450 ships with an estimated impact of 12% to global trade.² Domestic markets took the news in stride however and continued to rally higher through the month of April.

The emergence of two Covid-19 variants triggered major concern across the globe in 2021.

In May, the proliferation of the Delta variant quickly became the dominant strain in the U.S.. Delta’s ability to spread though vaccinated individuals sparked worry through medical professionals and markets.³ Q2 and Q3 set up to be a choppy period for equities as Delta continued to spread and vaccine efficacy was in question. Fortunately, towards the end of Q3, the vaccine still proved effective in reducing severe illness from Delta infections.

In Q4 markets broke out making new all-time highs with renewed hopes that the 2020 pandemic was finally in the rearview. Unfortunately, in December a new variant emerged with origins from South Africa. Initially there was major concern with this new Omicron variant as it appeared to have the greatest transmissibility of all Covid-19 variants. As cases rose and spread continued though the U.S. and other parts of the world, early studies suggested that individuals infected with the new variant were up to 70% less likely to be hospitalized.⁴ The positive reports were welcoming news for individuals and their families as the end of the year holidays approached.  

To wrap up, there is no doubt the past few years have been a rollercoaster of emotions for people, their families, and their financial situations. Markets endured a dramatic drawdown and recession in 2020 only to realize an equally impressive rebound in 2020 and 2021. Creation of vaccines and swift monetary and fiscal policy changes in a time of crisis have helped us emerge with hopes that 2022 is yet another productive year for investors and the beginning of the end for the Covid-19 Pandemic.

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