IN REVIEW

U.S. equities delivered strong performance in the final three months of the year, with the S&P 500 returning 11.0%. Intermittent volatility during the quarter, due to surging inflation and the discovery of the Omicron variant, didn’t derail the bull market. Investors remained focused on strong corporate earnings and continued strong GDP growth amid easy policy conditions. Global credit markets were down over the quarter, with the Bloomberg Global Aggregate Index returning -0.7%. Fixed income struggled throughout the year as long-term yields moved higher, and global central banks prepared to start tightening financial conditions. 2021 brought us a long way back to a pre-pandemic normal. Despite the Delta wave in the 2nd half of the year and the ongoing Omicron wave, economies largely remained open. Job growth was meaningful, consumer spending surged, and GDP surpassed its pre-pandemic levels. However, scars from the global economic shutdown are still evident in surging inflation, persistent supply chain disruptions, and a stubbornly low labor force participation. As we head into 2022, the overarching theme will be the moderation of trends from 2021. GDP growth, inflation, accommodative policies, and investment returns should all be lower relative to their 2021 levels. Still, the macroeconomic environment seems conducive to continued gains for risk assets in 2022 as we navigate the middle of this current economic cycle.

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