First Quarter 2022 Review

2021 was quite an unusual year for the world, but not necessarily for the capital markets. U.S. stocks strongly outperformed foreign shares, with every sector in the S&P 500 finishing up +15% or more. Volatility was also relatively subdued—there were only 55 trading days with moves of 1% or more in either direction (compared to 109 in 2020), and only seven days with a move of 2% or more. Bond yields moved higher, but still finished the year close to historic lows.

Above average equity market returns with below average volatility is not what many would expect from a year that featured a political crisis, a never-ending pandemic with a particularly impactful wave (Delta), a messy exit from America’s longest war, snarled supply chains, decades-high inflation, and an Omicron wave in time for the holidays. Just to name a few.

We continue to see economic growth and rising corporate earnings as dominant forces driving the markets in 2022. We do not believe all areas of the market will do well—navigating higher input costs and inflation requires strong balance sheets and pricing power, and rising rates are likely to result in multiple compression in certain areas of the market.