Market Notebook

Equities appeared to consolidate near all time highs while bonds continued a consolidation pattern with lowered volatility during the last week.

Equity performance during 2021 was outstanding as gains appeared to be fueled by the COVID recovery trade and amazing amounts of stimulus from the Federal Government. It remains to be seen as to the impact of government stimulus upon inflation. In the short term, inflation has been elevated. Will above-trend inflation continue into 2022?

At the beginning of the new year, I prefer to be bullish and optimistic about 2022. It seems possible that COVID’s impact on the real economy will lessen. The threat of high inflation is well known, and the Federal Reserve has tools at its discretion to combat inflation should it remain higher than optimal. There are significant transformations happening in the workplace, such as work from home, that may allow companies to lower costs, improve margins, and increase efficiency. Rapid progress is being made in Artificial Intelligence, Electric Vehicles, the Space Sector, and the Medical Sector. Many such changes will likely give the U.S. economy resilience, flexibility, and adaptability. Yes, market valuations are high on average; however, there are still relative values to be had. Don’t give in to the negative messaging coming from the media. We are living in a great country during extraordinary times. This does not mean that the market can’t experience correction because it most certainly can. Rather, over the long term, the future will be brighter than the past.

All the best in 2022!