Looking Back, Planning Ahead: Welcome, 2022!
Before we conduct a quick review of the year just ended and try to think about what may lie before us in 2022, we at Bernhardt Wealth Management want to start by assuring you of our sincere hope that you and your family and friends have enjoyed a peaceful holiday season. As one year ends and another begins, it seems natural to spend some time both in reflection on the past and consideration of the future. No doubt, that is why this month is named for the Roman god Janus, whose two faces gazed both backward and forward. In the same way, much of the financial industry is doing this sort of “two-way” thinking, as we move from 2021 into the future.
Perhaps the greatest disappointment many of us feel these days centers on our hopes that by now, the COVID-19 pandemic would be in the rearview mirror. Sadly, with the emergence of the omicron variant this past autumn, those hopes took a serious blow. With omicron accounting for a majority of new cases in the US, according to CDC estimates, it seems we might still need to exercise caution with regard to masking in public and other public health considerations. On the other hand, with mounting evidence that available vaccines and boosters appear to offer good protection against the most life-threatening effects of the disease and the risk of hospitalization is significantly less, there is greater cause for hope now than in the early days of the pandemic, when so little was known.
Nevertheless, the ongoing economic effects of the pandemic continue to ripple through economies worldwide. By now, most of us have heard about the widespread disruptions in global supply chains that have affected the availability and price of everything from computer chips to paper for books and magazines. This phenomenon has been aggravated by what many are calling the “Great Resignation,” as thousands of American workers have quit their jobs in response to a variety of factors that include perceived wage stagnation, reluctance of employers to institute adequate pandemic protection protocols, and a desire for even greater employment flexibility—likely accelerated and confirmed during the period when most companies were forced to adapt to the remote workplace. According to research published by the Harvard Business Review, the trend is higher in the healthcare and tech industries, and this may well be explained in part by the extreme stresses these two sectors have felt during the disruptions caused by the pandemic.
All this means that, in addition to the rising cost of goods and materials, companies are having a harder time finding and keeping qualified workers. It is likely that you have noticed the increasing prevalence of signs in front of various businesses that say “We’re hiring,” or something similar. As employers compete for available workers, upward pressure on wages results. This, added to increased material costs, is contributing to a principal trend that bears watching during the coming year: the return of inflation, which all but disappeared during the Great Recession of 2007-09. The financial markets have been especially sensitive to any appearance of uncontrolled inflation during the last months, and while many analysts believe that inflation will subside as pandemic-driven supply chain problems resolve, the markets will no doubt continue to watch closely.
A large part of resolving inflation is also wrapped up in the timing and extent of the US Federal Reserve’s “tapering” efforts, as the Fed seeks to unwind the massive doses of liquidity injected into the US economy in response to the onset of the pandemic crisis. Indications are that the US central bank will both increase the rate of its bond buying and is also likely to nudge interest rates higher in 2022, both tools that are intended to soak up the extra liquidity still circulating in the economy. The markets will be paying close attention to Fed policy, as well as to the results of those efforts.
Viewed in the aggregate, 2021 was another good year for equities. The DJIA rose from around 30,000 in January 2021 to its year-ending mark of more than 36,000 (+20%). The broader market as reflected in the S&P 500 fared similarly, moving from around 3,700 at the beginning of the year to close around 4,766 (+28.8%). Of course, as in any year, there were some bumps along the way—though nothing to compare to the dramatic drops experienced during the spring of 2020. What will the markets do in 2022? It’s impossible to predict with any reasonable degree of accuracy. However, investors with a long-term strategy who maintain a disciplined approach to asset allocation can be expected to fare reasonably well, both in 2022 and in the years ahead.
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We at Bernhardt Wealth Management send every wish for a happy and prosperous 2022 to you and those most important to you. In this year and market—as in all years and markets—our clients’ best interests are our central priority. If we can put our experience and expertise at your disposal, please let us know.
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Go to the Bernhardt Wealth Management Blog where this was first published to read this and other blog entries.
About Gordon J. Bernhardt: President and founder of Bernhardt Wealth Management and author of Profiles in Success: Inspiration from Executive Leaders in the Washington D.C. Area, Gordon and his team provide financial planning and wealth management services to affluent individuals, families and business-owners throughout the Washington, D.C. area. Since establishing his firm in 1994, he and his team have been focused on providing high-quality service and independent, unbiased financial advice to help clients make informed decisions about their money. For more information, visit Bernhardt Wealth Management and Profiles in Success.
Accelerating Ambitious CEOs - CEO Leadership Specialist - Executive Leadership Training - CEO Mindset & Performance Accelerator
3yThis is a great thought to ponder. Thank you for sharing.
President at Manjit Singh CPA PC
3yHappy New Year, Bernhardt, Team. It has been a great ride from 7309 Arlington Blvd, Falls Church, VA.. We should catch up some day, soon. I see quite a few names i recognize in your list of 'clients.'