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Market Commentary

January 2022



Civista Wealth Management Logo
Frank P. Sudal, CFP®, CFA
Trust Investment Management

Total Returns (%) as of December 31, 2021

Fixed Income YTD 1 Mo 3 Mo 1 Yr 3 Yrs 5 Yrs 10 Yrs
U.S Aggregate

-1.54

-0.26

0.01

-1.54

4.79

3.57

2.90

High Yield

5.28

1.87

0.71

5.28

8.83

6.30

6.83

Global

-9.68

-0.67

-1.98

-9.68

1.76

2.68

0.34

Equities






U.S. Large Cap

28.71

4.48

11.03

28.71

26.07

18.47

16.55

U.S. Small Cap

14.82

2.23

2.14

14.82

20.02

12.02

13.23

Developed International

11.26

5.12

2.69

11.26

13.54

9.55

8.03

Emerging Markets

-2.54

1.88

-1.31

-2.54

10.94

9.87

5.49

Source: Morningstar.  U.S. Aggregate - BBgBarc US Agg Bond.  High Yield - BBgBarc US Corporate High Yield.  Global - FTSE WGBI NonUSD.  U.S. Large Cap - S&P 500.  U.S. Small Cap - Russell 2000.  Developed International - MSCI EAFE.  Emerging Markets - MSCI EM.
 

U.S equities closed out double-digit returns for a third straight year. Absolutely remarkable. The S&P 500 soared 28.71% for the year and 4.48% for the quarter. U.S. small caps were “half way there” but still advanced a robust 14.82% for the year and 2.23% for the quarter. Although many headwinds persisted throughout 2021 (new Omicron variant, supply chain snags, inflation…) corporate earnings managed to increase 45.1% year-over-year. This is well above the trailing 10-year average annual 5.0% earnings growth rate, according to FactSet, and marks the highest annual earnings growth rate reported by the index since FactSet began tracking this metric in 2008. 

The international markets were diametrically opposed. While developed international also joined the double-digit club, posting an 11.26% gain for the year, emerging markets declined 2.54% over that same period. Developed countries have much higher vaccination rates and were able to reopen their economies at a far greater pace relative to the emerging markets.

The 10-year Treasury began 2021 with a meager 0.93% yield. Even with inflation and the prospects of a more hawkish Fed, the yield only rose 58 basis points to close out the year at 1.51%. Although the rise in yields caused investment grade bonds to decline 1.54% in value, the significant global demand from foreign investors acted as a counterbalance to help keep the yield from rising further. Conversely, high yield debt rose 5.28% in value, largely due to improving economic and corporate health.

The International Monetary Fund’s latest world economic growth projections indicate that this year’s growth will slow somewhat. 2022 real GDP is projected to be 5.2% for the U.S., 4.5% for advanced economies, and 5.1% for emerging markets. The pandemic, inflation, and how they are addressed, will likely be key contribution factors for 2022 market performance. Our base case is normalization and moderation. We expect inflation to abate, rates to rise, and corporate earnings to slow.   

As we start 2022, we wanted to wish everyone a happy, healthy, and prosperous New Year. Thank you for allowing us to be such an important part of your financial lives.