Happy New Year. What a year we had in 2021. Between the headlines with GameStop, Tesla, Bitcoin, oil prices, interest rates, inflation, Delta, Omicron, boosters, supply chains, PCRs, MRNA, ESG, and other various letters in the Greek alphabet, it was hard at times to think about the long-term. However, that’s what we do and what we want to emphasize – the long-term benefits of investment planning and strategies – while also giving some context to the current headlines dominating the news.

Let’s first take a look at what’s been influencing the market lately, how most of the news isn’t really all that new, and why we continue to assume that ongoing uncertainty is the only real certainty we can count on to inform our investment decisions.

Market Perspectives: New News or Tired Tropes?

Equities Indices Q4 2021 1 year 3 years 5 years 10 years
S&P 500 (U.S. Large Cap) 11.0% 28.7% 26.1% 18.5% 16.6%
Russell 2000 (U.S. Small Cap) 2.1% 14.8% 20.0% 12.0% 13.2%
MSCI EAFE (International Developed) 2.7% 11.8% 14.1% 10.1% 8.5%
MSCI EM Emerging Markets (International Emerging) -1.2% -2.2% 11.3% 10.3% 5.9%
Fixed Income Indices
FTSE World Government Bond Hedged (Global Bonds) 0.0% -2.4% 3.4% 3.1% 3.9%
Bloomberg U.S. Aggregate (U.S. Investment Grade Bonds) 0.0% -1.5% 4.8% 3.6% 2.9%
Bloomberg Municipal Bond 5Y (4 – 6) (Municipal Bonds) 0.0% 0.3% 3.3% 3.0% 2.4%
Bloomberg U.S. Corporate High Yield (U.S. High Yield) 0.7% 5.3% 8.8% 6.3% 6.8%
Other Indices
S&P Developed REIT (Global Real Estate) 12.8% 33.0% 15.3% 9.7% 10.5%

Data ending 12/31/2021 (not annualized if less than 1 year)
Source: Zephyr Analytics and Morningstar
The returns shown are annualized returns, except for periods less than one year, for selected asset classes as represented by benchmark indices. Investors cannot invest directly in an index. Unmanaged indices do not reflect management fees or transaction costs. Past performance is no guarantee of future results.

Legendary sports announcer John Madden was full of energy and exuberance. When he saw a great play and exclaimed “BAM!”, it just went right to the core. That’s a bit like what we have seen for equity returns, not only for 2021, but for the last several years. Bam! What gains we’ve seen. Bam, how about those markets?

Let’s dive in. It wasn’t just about one market though. While U.S. large cap (measured by the Standard & Poor’s 500 Index) had another strong year, +28.7%, many others did well, too. For example, small-capitalization equities (measured by the Russell 200 Index) achieved a solid 14.8% gain for the year and have averaged more than 13% for the 10 years ending 2021. The S&P 500 Index’s 28.7% total return was the 14th best annual return since 1950, shown in green in the chart below.

International developed markets, measured by the MSCI EAFE index, gained 11.8% in 2021 and the emerging markets, measured by the MSCI EM Index, fell 2.2%. If we think back to the headlines over the summer of more slowdowns, supply chain issues, and the various ripple effect, it is not surprising to see lower returns on international equities. Further, the U.S. dollar appreciated against global currencies for most of the year and that tends to mute international returns (especially emerging markets), on a relative basis.

Even after being down in 2021, emerging markets are up 11% annualized for the last 3 years. That means that 2019 and 2020 gained about 18% in each of those years.

International equities will clearly depend on global growth prospects, exchange rates, and the free flow of capital and there will always be differences between U.S. equities and international equities. We are in a global economy, and it is neither possible nor beneficial to ignore what goes on outside of our borders.

The U.S. Aggregate Bond index was down 1.5% in 2021, which is only the 4th negative annual return since 1976, when the index was created. Positive returns from corporate bonds and municipal bonds demonstrated the benefit of fixed income diversification.

The REIT index gained 33% in 2021, outpacing U.S. and international stocks and far outpacing bonds. It’s incredible to think that real estate has averaged 10% annually for not only the last decade, but also the past 20 years because that period includes the end of the tech bubble, the credit crisis/real estate crash of 2007-09, and the collapse in early 2020 of real estate. The headlines have mentioned fears of a “collapse” in real estate. We have not experienced consistent annual periods of lower gains, or even losses. Long-term though, real estate has some nice risk/reward benefits, and it is hard to argue against having real estate in a diversified portfolio.


Inflation was a substantive issue after being low for many the years. It’s been particularly apparent across housing prices and daily consumables, such as groceries and gas. Corporate earnings economic data were generally positive throughout the year. A strong job market, and strong consumer demand, mixed with supply chain and labor shortages led higher inflation in 2021.

Over time, many of the headline inflationary factors may dissipate as the record amounts of fiscal and monetary stimulus slow and supply chain issues work themselves out. The Federal Reserve recently indicated they will end their bond-buying program and increase interest rates at a faster pace than originally anticipated.

Interest Rates

Where will interest rates go in 2022? My invitation keeps getting lost in the mail so I can’t tell you exactly what gets talked about when the Fed Governors meet. Rates are always moving and while we can’t control them, we can control how we approach them. We emphasize overall stability in fixed income which includes quality, shorter duration, good yields, and a global approach.


“It’s tough to make predictions, especially about the future” has been written a few times over the years. Even the most optimistic market strategists in Barron’s 2020 year-end survey report had underestimated 2021. The respondents provided estimates for the S&P 500 ranging from a low of 3800 to a high of 4400. The S&P 500 Index actually closed 2021 at 4766. There are so many variables that are factored into equity returns (corporate earnings, economic growth, fiscal & monetary policies, etc.) and making inaccurate assumptions on any one of them can cause an incorrect price target. Rather than make such bold predictions, we prefer to have balanced portfolios with the goal of performing well across many different market environments.


As 2021 went along, it appeared that Congress would enact a tax bill. By year-end though and as of this writing, none of the fiscal legislation has yet been realized.

Transitory News and Durable Progress

This time last year, most of us were hoping we’d be viewing the pandemic largely in hindsight by now. In our own Q4 2020 Investor Perspectives, I commented on our remarkable ability to harness innovations to resolve the seemingly unresolvable. Reflecting on how rapidly the global community had developed relatively effective vaccines, we wrote that, “It’s hard not to be positive as I think about it and looking forward for what’s to come.” Continued progress is being made.

Although the pandemic lingers on, we remain positive. The daily news tends to fixate on the most dramatic events in the moment. In the meantime, medical innovations and technological developments during the past two years have been miraculous.

As the late researcher and epidemiologist, Hans Rosling, wrote in Factfulness:

“It is easy to be aware of all the bad things happening in the world. It’s harder to know about the good things: billions of improvements that are never reported. Don’t misunderstand me, I’m not talking about some trivial positive news to supposedly balance out the negative. I’m talking about fundamental improvements that are world-changing but are too slow, too fragmented, or too small one-by-one to ever qualify as news. I’m talking about the secret silent miracle of human progress.”

That’s what we’re talking about too. If anything, the past few years are examples of how we must look past our headlines and toward more substantive advances that ultimately translate into long-term investment returns.

Emphasis on Planning

We continue to underscore why a solid financial plan isn’t just about your investments. Of course, it’s important to build and maintain an efficient, globally diversified portfolio based on an evidenced-based approach to carry you through. However, there is so much more involved to keep you on track toward your goals. Investing is just one piece of the puzzle, which needs to fit with the other pieces such as estate planning, charitable gifting, tax strategies, risk management, income planning, education, and personal health. They all need to fit together to complete the picture.

In the face of an evolving investing environment these past few years, your goals may have evolved as well, and should be factored into your greater financial plan. The point is, life changes, for better, for worse, and often on a dime. Planning isn’t about preventing change, but making the most of it.

For those interested in a deeper dive, we’ve included a review of global asset performance and additional market perspectives in the following pages. As always, please let us know how we can help. We thank you for your continued trust and support.


George T. Padula, CFA®, CFP®
Chief Investment Officer

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