Broker Check
Predicting the Market

Predicting the Market

December 31, 2021

Fourth Quarter Market Summary

Equity returns were very strong for the final quarter of 2021.  US stocks marched about 11% higher even as fears over rising cases of the Omicron variant and how quickly the Fed will begin asset tapering weighed on investors.  The economy is continuing to recover as the unemployment rate fell to 4.2% and labor participation rose, but we are still about 1.5 percentage points below pre-covid levels. 

International stocks returned 2.8%, continuing their underperformance relative to the US.  Emerging markets performed the worst, losing 1.3% for the quarter.  China was exceptionally bad, losing over 6% for the quarter and down 21.7% for the year.  Developed international stocks fared much better, up 2.7% for the quarter.  

The 10-year Treasury ended the quarter almost exactly where it started with a yield of 1.5%.  This was somewhat surprising given the Fed announced plans to taper its asset purchases and raise rates in 2022.

Below is a table highlighting various market index returns over the past 3, 12, and 36 months:


As the year begins, the talking heads and investment prognosticators like to release their “expert” predictions.  The truth is that they don’t have any idea more than anyone else. For job security and to get on financial news networks, they can’t say  “I have no idea where this market is going”. 

So, what can an investor do in this environment?  You can review your asset allocation, revisit your long-term goals, review what happened last year, make reasonable assumptions based of historical evidence, and remember that you can’t time the market. 


As we begin 2022, it is easy for investors to feel like there is no way that stocks can go higher.  However, many of these same sentiments were present at the start of 2021 after markets ended the year up double digits in 2020.

The fact is, there is always a reason to sell if you look for one.  It’s important to remember markets are resilient as the chart above illustrates. Bad news makes for a great headline to get you to tune in so that networks can sell advertising, but oftentimes leads to poor investment decisions. 


There are multiple products now available that attempt to give investors exposure to cryptocurrency.  None of which, track the spot price very well.  BITO was launched in October, aiming to provide exposure to Bitcoin Futures, and has garnered about $1 billion in assets.  Time will tell how well it tracks the performance of Bitcoin itself, but other futures-link ETFs have often had a difficult time keeping tracking error low.

In addition, there is the Grayscale Bitcoin Trust (GBTC) which has assets of about $27 billion.  The goal again is to track the price of Bitcoin.  Below you can see the previous 1-year return of the Bitcoin Reference price (blue) vs GBTC (green).  It has done a very poor job tracking the exposure of actual Bitcoin, lagging by 48 percentage points. 



As the asset class continues to mature, we expect to see other product launches that will do a better job of getting investors exposure to the underlying asset.  We will be on the look-out for such investment vehicles.


We saw prices of goods soar in 2021.  Shortages of input materials, from computer chips to labor, were often cited as the main cause for the price increase.  With many people working from home and looking for socially distant recreation areas, we saw the price of furniture skyrocket!

Recently, the federal government announced that it was raising its starting minimum wage to $15 per hour in accordance with President Biden's Executive order. Many states already had plans to raise the minimum wage to $15 an hour. The wage hikes are likely here to stay, while other price increases could prove to be transitory.  Housing supply continues to be low, even as builders continue to construct new homes (consider it takes about 6 months to build a home).  There continues to be a lack of semiconductors as well as shipping containers to ship goods.  As the bottlenecks work through the system and the supply chain gets back to “normal”, the hope is not all the price increases will persist.    


I’m sure you’ve heard Phil and me say it before, “we have no idea where the market is headed in the short-term,” no one does.  We’re confident, as history has proven, that equities will rise in the long-term and investors should control risk to take advantage of the inevitable ups and downs. 


Stay warm! 


JR Geld, CFA, CFP®          


Philip E. Huber, Jr, CPA, CFP®


HWA Financial Group

3448 Ellicott Center Dr.

Suite 101

Ellicott City, MD  21043



Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by HWA Financial Group -“HWA”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from HWA.  Please remember that if you are a HWA client, it remains your responsibility to advise HWA, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. HWA is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of HWA’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request. Please Note: HWA does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to HWA’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.