Q4 2021 Stock Market Commentary

For the third consecutive year, the stock market posted a double-digit positive return. The S&P 500 gained 26.9% for the year, the Dow Jones Industrial Average posted an 18.9% gain, and the Nasdaq Composite gained 21.4%.

Double-Digit Returns Despite Challenges

The market confronted and largely ignored a lot of events that normally would have sent the market reeling. Including a contested presidential election, high inflation, supply chain issues, a slowing economy, and a coronavirus pandemic that just won’t quit.

Despite these issues, the market seemingly marched higher month after month. Nine of the 12 months in 2021 posted positive gains and only the month of September had a meaningful loss. In fact, the S&P 500 recorded an all-time high 70 times during the year – the second-most ever in one year.

Novice Investors May Struggle

This has led investors to a sense of entitlement that could be getting a bit dangerous. With Crypto Currencies soaring, Electric Vehicle Makers racing higher, and many non-profitable software companies trading at astronomical valuations, the risk was definitely “ON” for 2021.

New Year New Theme?

As we enter 2022, we have a similar theme to the market that we have seen in the past several years and that means – Growth! In order to maintain these lofty valuations in the stock market, the underlying earnings and revenues for the individual companies that make up the indices need to continue to grow at an above-average rate.

This may prove difficult as the economy is losing steam with waning fiscal policy. The Fed has also indicated that its easy monetary policy is coming to an end as well. These two hurdles could potentially cause the market to pause and hopefully refresh – which wouldn’t be such a bad thing.

WE’RE HERE TO HELP

Chesapeake Financial Advisors is a fee-only financial planning, investment advisory and tax planning firm with offices in Towson, Columbia, and Frederick, Maryland.

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