Despite the continuing challenges from the presence of COVID, 2021 turned out to be a good year for investors. We experienced multiple waves of businesses re-opening, then restrictions, followed by more re-openings, even as new variants made their way around the globe. A side effect of these waves was supply chain disruptions in many parts of the economy, from car components to ingredients in your favorite restaurant dishes. As the economy revived, unemployment continued to fall, with job openings exceeding the number of labor participants seeking work. The shortage of goods and people has led to the largest jump in inflation in over 30 years. Extended periods of high inflation can have a negative impact on just about everyone, from retirees to savers.

Despite these seeming contradictions, global growth was strong in many areas. The US Large cap markets experienced returns above 28%, Small caps just under 15%, and international markets above 11%. The ongoing concerns about China regulation and some geopolitical risks took a toll on emerging markets in 2021, which were down almost 3%.

In 2022, the impact of the Fed’s plans to raise interest rates and reduce their balance sheet will be watched closely by many. Will inflation ease because of these policies or will it persist and continue to erode the current purchasing power of consumer dollars? Will the rate of economic growth outpace this season of higher inflation? COVID and geopolitics may also contribute to greater volatility in the year ahead.

Questions continue: How do we position bond portfolios to weather the storm of rising interest rates? Are there biases within equities portfolios we can manage or reduce to keep pace with growth expectations? How do we combat inflation should it persist? Positive portfolio returns are great, but real returns are what matter most. The SoundView team continues to monitor the situation, as well as these key elements, to keep clients on course to achieve their goals. We believe well-diversified portfolios will continue to reward and protect investors in times such as these.