It's A Wrap! - 2021 In Review

As we close 2021, it's a good time to review how we dealt with the events that shaped the year. At the onset of 2021, the world was dealing with the impact of COVID in many different ways. In the US, high-momentum digital growth companies were beginning to slow as the rest of the economy was returning to a more "normal" state of business. Outside the US, many countries began economic recovery, but with much less momentum due to their regional conditions, and their governments' financial responses to COVID 19. In the USA As 2021 got underway, we saw consumer discretionary sectors like travel, autos, housing, entertainment, and big ticket items really accelerate as combined pent-up demand and very high levels of personal savings set the stage for a historic run up in demand for these goods and services. As the year progressed, the demand for consumption in these areas fueled supply chain issues with manufacturing, logistics, transportation, and distribution of all goods. Theses supply constraints began to cause shortages and delays in nearly all parts of the economic system by Q3, which by Q4, translated into rapidly rising prices in nearly all sectors of our economy. Inflation By mid-year, economists begin to discuss the impact of inflation and debated as to whether or not it would be short-term (transient) or longer-term (structural), and the outcome of this debate would be a guiding post for our Federal Reserve to make further adjustments to our nation's money supply. Mid way through Q3 ,the Fed adopted the position that this inflation may not be transient, and began to voice its intention to "begin" to bring in the money supply and raise rates in the "coming year". This policy shift by the Fed represents a directional shift that many people have not seen in their lifetime. As the markets try to understand what this means for stock prices and economic growth, market volatility increased in the second half of the year causing investors to see a couple months of negative returns in most asset classes for the first time since the onset of COVID.

Santa Claus Came to Town (late) As we wind down the last week of trading for the year, the "buy the dip" crowd showed up and bought US stocks late into the closing week of trading, pushing several indexes to new all time highs.

How did we do? In thinking about the various positions that we had in accounts in 2021 as well as the overall advice we gave our clients this year, we would conclude that this year was an overall successful year. If we were grading our work, probably would receive an "A-" this year. Here are a few noteworthy items that would go into that grade: Overall participation in the broad US stock market: A Our investment exposure in the US was higher in all of our various models than in most years of the past 20 years. Exposure to Risk (measured by portfolio standard deviation): A+ Overall our portfolios produced much lower ranges of price volatility that historical years l