2021 is now in the books, and it is sure one that we will all remember. 2020 carried over into 2021 with COVID-19, then the Delta variant, and then Omicron. On the enormous side, we have Apple with a market capitalization of close to $3 trillion, and Elon Musk had a tax bill of $11 billion. We also saw the beginning of pay-for-space-tronauts, and inflation skyrocketed to 5.7% for the 12 months ending in November, which was the fastest increase in the consumer spending price index since July 1982. On the plus side, initial filings for unemployment insurance dipped last week and remained close to their lowest level in more than 50 years. However, through it all, the markets were bullish and the major indices finished with double digit gains. What was quite remarkable was the steady advance of the S&P 500, which hit 70 new record closes this year, trailing only 1995s 77 record closing highs. Looking at this another way, the S&P 500 has posted at least one new record close every month since November 2020. What was also unusual was the lack of a market correction. The largest S&P 500 drawdown was between the 2 September record closing high of 4536.95 and 4 Octobers subsequent low of 4300.46, a drop of only 5.21%. Also, the S&P 500 has remained above its 200 day Moving Average for the entirety of this year. That has only happened four times since 1981, but in three of those cases the market declined the following year. So what should we expect in 2022? Looking at the seasonalcharts.com 4 year election cycle chart, the Mid-Term election year (2022) is characterized by choppiness and lower returns. Digging a little deeper, I looked back at the last Mid-Term election year in 2018, and the S&P 500 had daily moves of 1 percent or more 64 times with the down days exceeding the up days, 33 to 31. 2018 was also the last time the S&P 500 had a negative year. So how does that compare to 2021. Last year we had 55 such 1% moves, but in this case the up days handily beat out the down days, 34 to 21. So yes, weve lived through volatility before, but I do think corporate earnings will have a major impact. According to FactSet, the 2021 annual earnings growth rate was 45.1%, which would be the highest since they began tracking the metric in 2008. Hopefully earnings will continue to be strong going into 2022, and this bull market will keep running to the upside. For TSP TIPS, the Santa Claus rally continues through Tuesday and our current allocation remains appropriate. As always, well continue to monitor market conditions and make adjustments as needed. Lastly, we wish everyone a very Happy New Year!!
2021 is now in the books, and it is sure one that we will all remember. 2020 carried over into 2021 with COVID-19, then the Delta variant, and then Omicron. On the enormous side, we have Apple with a market capitalization of close to $3 trillion, and Elon Musk had a tax bill of $11 billion. We also saw the beginning of pay-for-space-tronauts, and inflation skyrocketed to 5.7% for the 12 months ending in November, which was the fastest increase in the consumer spending price index since July 1982. On the plus side, initial filings for unemployment insurance dipped last week and remained close to their lowest level in more than 50 years. However, through it all, the markets were bullish and the major indices finished with double digit gains. What was quite remarkable was the steady advance of the S&P 500, which hit 70 new record closes this year, trailing only 1995s 77 record closing highs. Looking at this another way, the S&P 500 has posted at least one new record close every month since November 2020. What was also unusual was the lack of a market correction. The largest S&P 500 drawdown was between the 2 September record closing high of 4536.95 and 4 Octobers subsequent low of 4300.46, a drop of only 5.21%. Also, the S&P 500 has remained above its 200 day Moving Average for the entirety of this year. That has only happened four times since 1981, but in three of those cases the market declined the following year. So what should we expect in 2022? Looking at the seasonalcharts.com 4 year election cycle chart, the Mid-Term election year (2022) is characterized by choppiness and lower returns. Digging a little deeper, I looked back at the last Mid-Term election year in 2018, and the S&P 500 had daily moves of 1 percent or more 64 times with the down days exceeding the up days, 33 to 31. 2018 was also the last time the S&P 500 had a negative year. So how does that compare to 2021. Last year we had 55 such 1% moves, but in this case the up days handily beat out the down days, 34 to 21. So yes, weve lived through volatility before, but I do think corporate earnings will have a major impact. According to FactSet, the 2021 annual earnings growth rate was 45.1%, which would be the highest since they began tracking the metric in 2008. Hopefully earnings will continue to be strong going into 2022, and this bull market will keep running to the upside. For TSP TIPS, the Santa Claus rally continues through Tuesday and our current allocation remains appropriate. As always, well continue to monitor market conditions and make adjustments as needed. Lastly, we wish everyone a very Happy New Year!!