2021Quarter 4 Market Update

Index Returns:                            4th Quarter                             Year 2021

Stocks

S&P 500 (VOO):                               11.09%                                    28.78%

Small Cap Index (VB):                        3.85%                                      17.56%

Mid Cap Index (VO):                         8.00%                                      24.69%

International (VXUS):                          2.03%                                       9.00%

Bonds

Core US AGG Bond (AGG):            (0.10%)                                   (1.77%)

Municipal Bond Index (MUB):           0.67%                                      1.02%

2021 was another exceptional year for U.S. domiciled stocks, while safer fixed income investment returns were muted. Here are the economic themes of 2021 that impacted market returns:

Covid Virus

Year 2021 opened with a high number of daily new cases. That number decreased until August when the Omicron variant began spreading, and we’re now hitting all-time high new daily cases. While market volatility did increase in September, economic production and consumer spending have hardly been impacted.

Inflation

Economic production and supply chains came to a screeching halt in early 2020. When the economy began opening later in the year, markets fully rebounded, and consumer spending skyrocketed. This high demand of goods and services led to supply chains being stretched, a lack of employees and supplies to meet demand, and ultimately price increases. For example, Brent Crude oil price per barrel appreciated from $50.08 to $77.94, a 56% increase in 2021. And higher prices benefit stock profitability.

Monetary Policy

Interest rates remain historically low. The cost of borrowing money is incredibly cheap. As the economy continues strengthening, the Federal Reserve has communicated plans to increase short-term borrowing rates. Bond prices have dropped to reflect these higher expected rates.

James, Parker, and I are meeting with many of our investment strategy partners over the next couple of weeks. We look forward to sharing our takeaways with you.

Stephen W. Miller, CIMA®, CRPC®      James E. Miller, CFP®                 J. Parker Morris

Senior Financial Advisor                                Senior Financial Advisor                    Financial Advisor