KEY HIGHLIGHTS
- The S&P 500® was up 4.36% in December, bringing its 2021 return to 26.89%.
- The Dow Jones Industrial Average® gained 5.38% for the month and was up 18.73% for 2021.
- The S&P MidCap 400® increased 4.92% for the month, bringing its 2021 return to 23.21%.
- The S&P SmallCap 600® grew 4.36% in December and had a 2021 return of 25.27%.
MARKET SNAPSHOT
As for the year that was—it was, posting a broad 26.89% gain (28.71% with dividends), and 434 issues gained for the year, as 96 gained over 50% and 7 declined at least 25%. All 11 sectors posted double-digit gains (7 gained last year, with 5 in the double digits). COVID-19 continued to dominate the news, as the vaccines (and now the boosters) permitted Americans to spend more outside. But it was spending inside, especially via e-commerce, that permitted record earnings, sales, and margins for the S&P 500, as consumer wealth shot up (via equities and home ownership, as well as lower spending), and confinement seemed to boost spending.
Also supporting the economy was a friendly Fed, which kept rates near zero. While bond buying support is expected to end in March 2022, and rates are likely to rise (first increase potentially in June 2022), even with three increases (of 0.25% each), rates would remain low and therefore supportive. Inflation, however, may be a different issue. While the supply shortage is expected to ease, labor shortages (or “displacements”—the new term that has emerged) may be harder to resolve. Telecommuting has also added to the labor change, as it started growing pre-COVID-19 and is now in full swing, with most offices still more empty than full. Still, optimism prevails, as money flowed into the market (which helps to keep nervous money managers in), and the S&P 500 posted new closing highs (70 for the S&P 500 in 2021, ranking second only to 1995’s 77), as the “don’t fight the Fed” saying changed to “don’t fight the flow” (for a while it was “don’t fight the FT—the Fed and the Treasury).
