The S&P 500 finished 2021 up 28.71%, while international equities lagged, up 8.78%

Large growth outperformed large value with returns of 27.60% and 25.16%, respectively. Small-cap value exceeded small-cap growth with returns of 28.27% and 2.83%, respectively.

The consumer-price index rose 7% in December from the same month a year ago, the third straight month of inflation exceeding 6%.

Unemployment fell to 3.9%, as demand for labor increased, resulting in inflationary pressures.


Entering 2021, investors faced a backdrop of uncertainty, and there were many reasons to be pessimistic about the markets. In modern history, restoring a world economy from an abrupt halt was unprecedented, and COVID-19 continued to impact business activity. Despite that, markets demonstrated strong performance, the unemployment rate fell to 3.9% in December, and S&P earnings grew by 34.5%. More than any other, the past year demonstrated the importance of staying disciplined despite all the “noise.”


Economic activity has surpassed its pre-pandemic levels and consumer financials, in aggregate, appear healthy. Vanguard’s Economic and Market Outlook for 2022 anticipates GDP growth of 4%. However, some factors pose risks to the strong recovery and normalization of the economy. Bottlenecks in the supply chain and labor and materials shortages have pushed prices higher, and there is uncertainty around when these issues will subside. Overall, supply and demand imbalances continue to persist.

The U.S. labor force is unlikely to return to pre-COVID levels as retirements and unanticipated retirements totaled two million as of June 2021.

Going forward, it is expected that the U.S economy will experience strong growth but at a decelerating pace. The consensus is also that inflation will persist in the 1st half of 2022. Concerns are whether the Fed can keep inflation in check without stalling the economy, if supply chain issues can be resolved and if higher interest rates will result in 1970’s stagflation (stagflation occurs when inflation is high and the economy slows, leading toward higher unemployment).


The Fed has remained extremely accommodative in its stance towards the economy, despite the strength of the recovery, inflation pressures, and low unemployment rates. However, recent statements from Chairman Powel indicated that the era of “easy policy” may be coming to an end as unemployment levels tick lower, and the focus shifts to combatting inflation. The Fed’s extraordinary bond purchases are expected to end late Q1 or sometime in Q2. Additionally, it is anticipated that there will be as many as three rate hikes in 2022.


We are cautiously optimistic for 2022. Valuations appear stretched in specific sectors of the market. We still anticipate positive returns for the stock market but less than the double digit returns of the past three calendar years. We will continue our disciplined approach, no matter the noise, to monitor portfolio allocations and to rebalance when necessary, conduct tax-loss harvesting where appropriate, and diversify portfolios to capture return but minimize risk.


Our Contact Information

3838 Camino del Rio North
Suite 365
San Diego, CA 92108

The Platt Wealth Management team is here for you to discuss any changes to your financial situation or investment objectives. We are always available to assist you with any financial matters of concern to you. We look forward to continuing to serve as your partner along your financial journey.

Warmest regards,
Platt Wealth Management


[ultimatemember form_id=”1899″]