Year in Review: A Look Back at the Markets in 2021
From the continued acceleration of digital transformation to supply and demand imbalances on everything from consumer products to manufacturing materials, the second year of the COVID-19 pandemic resulted in many economic trends that affected markets throughout the year.
Here’s a look at a few of the larger trends we tracked throughout the year, and some we’ll see continue on into 2022.
Government Stimulus Spending
The past 18 months have seen a massive amount of money printed for government economic stimulus spending and COVID recovery packages. “It’s unparalleled in modern history,” says Wayne Wachell, Executive Chair and Chief Investment Officer at Genus.
In the U.S., this equated to $4.5 trillion via six relief bills, with more yet to be spent, while in Canada, pandemic relief spending continues to inch past $100 billion. This liquidity should start to dry up in 2022, unless new variants change the course of the pandemic.
A Rebounding Stock Market
With more money in individual pockets to prop up economic recovery, more investment dollars flowed into stock markets, as stocks began a strong recovery after the crash of 2020.
Genus made use of numerous financial models and technologies to develop stock picking and asset allocation processes that served our clients well in 2021. “Our portfolio of high yield stocks has done really well this year,” Wachell says, “Value is starting to work again and that’s helping our dividend strategy.”
Rising Inflation and Interest Rates
As inflation and interest rates started to rise in 2021, the effects were felt in stock and bond markets. “With so much debt, the feds can’t be too draconian on raising interest rates,” Wachell says. “But we’ll see more ice in the markets as the rates go up.”
Genus’ hedge here has been to go overweight in financials and energy, and to go underweight on bonds.
Supply Chain Issues
COVID stimulus spending, sector shutdowns and employee shortages created a perfect storm for supply chain issues to seriously hamper inventories.
This has only served to create more pent up demand for consumer products, which is good news for many market segments in the long term.
A Story of Fire and Ice
As Wachell detailed in our October Monthly Market Insights, 2021 was essentially a story of fire and ice, with strong market growth buttressed by liquidity and government spending, followed by concerns around inflation and rising interest rates as the year came to an end.
And it’s a story that will continue well into 2022. “It’s often darkest before dawn,” Wachell says. “And we’re hopeful 2022 will be the recovery year we’ve all been waiting for.”
Join us as we dive deeper into these trends and more at our 2021 Year in Review webinar. We’ll look back on the events that created 2021’s biggest investment trends and take a look at where we’re headed in 2022.