January 2022 -A new year brings new challenges

First, we would like to wish you and your family a happy and healthy New Year!

With the New Year comes new beginnings, new goals, new challenges, and new opportunities. 2021 was a challenging year for the economy, but another good year of investment returns for our Opinicus clients. The S&P 500 Index crossed over our 2021 year-end target of 4,600 in early November and despite the Omicron variant, managed to close the year at 4,778.

Looking back at 2021, the U.S. economy grew over 5% for the year, which will end up being the best year for economic growth since the early 1980s. Dual tailwinds of both fiscal stimulus and monetary policy helped steady the economy as it dealt with historic supply shortages, record inflation, employment shortages, and the pandemic.

In the year ahead, we expect to see domestic economic growth transition from fiscal and monetary stimulus to an economy growing firmly on its own, with consumers, productivity, small businesses, and capital investments all playing a part in the next stage of economic growth.

2021 was the year nearly everything was in short supply, and it translated to added inflationary pressures. Record numbers of ships waiting at ports, a lack of materials, unfilled job openings, higher commodity prices, and a myriad of supply chain disruptions have added to price pressures. We believe these inflationary pressures will steadily decrease this year as conditions improve.

We expect solid economic and earnings growth in 2022, which will help U.S. stocks deliver additional gains this year. If we are approaching— or are already in—the middle of an economic cycle with at least several more years left, then we believe the chances of another good year for stocks in 2022 are quite high. We still favor U.S. equities over developed international, tilt towards value over growth, and prefer cyclical sectors over defensives (where appropriate).

We expect interest rates to move modestly higher this year, based on near-term inflation expectations above historical trends and improving growth expectations once the impact of the COVID-19 Delta and Omicron variants recede. However, an aging global demographic that needs income, higher global debt levels, and rebalancing into fixed income from equities may keep interest rates from going much higher over the next year. Nonetheless, with starting yields still low by historical standards, bond returns are likely to be disappointing this year.

Lastly, 2022 is a mid-term year, which means Washington talk will soon dominate the news cycle. Please remember to separate your political views from your investments, as the market cares more about the future of the economy than anything else.

In closing, we are positive and hopeful that 2022 will be good year for our clients and our economy. There is no doubt 2022 will have its own challenges… but after the last two years, we’re very confident we can handle it.

We wish you and your family a great Friday evening, and a wonderful weekend!


As always, please reach out to us with any questions or comments you may have regarding your specific situation.


Jaran C. Day, Chief Investment Officer

Griffin Dalrymple, CFP®, Chief Strategy Officer