2021 is nearly in the books and I thought it would be good to take a quick glance over the shoulder a bit.
WE GOT IT WRONG!
On the heels of the presidential election (one for the ages), there was a lot of speculation around the new president and what his policies would be, IF he would even be allowed to take the office in the first place. VP Harris was thought of as the “real” person people were voting for given President Biden’s age and apparent mental capacity. So keeping client’s calm and away from their own election biases was anything but easy. Jan 6th was a shock with the storming of the US Capital, the first time since the 1954 by “patriots” and what a mockery of our country on a world stage that demonstrated!
COVID was hitting highs in Texas, California, Florida & Michigan in January as well, reminding us all that we’re far from the all clear signal.
We were thinking that if we ended the year with a 6% Rate of return, we should consider that a home run. Well, portfolios significantly outperformed our mark for them when the year began. By March, we had surpassed our company growth goals, for the entire year and felt like the wheels were just beginning to turn. We continue to see mass shootings unfolding, stoking the racial and social unrest in the country with the Atlanta Spa Shootings, Boulder Shooting and Orange, California Office Shooting.
I have often heard the expression in my industry that investors have a short-term memory and while normally I fail to see the logic behind sayings like that, this one certainly proved true on a couple of fronts. First, we have seen the FOMO (Fear Of Missing Out) hit the markets in force not once (in May) but twice (again in Sept) when the amateur investors began to second guess the experts and defy all logic to the markets. None was more evident than the whole GameStop Story. GME was not the real big winner of the year though as everyone might think. AMC turned out to have a 1400+ % Return this year! Our investment strategy for clients should have been take all the money, ignore tried, true and sound investment principals and put it all in AMC theaters—a nearly bankrupt company, because by year’s end, you would have earned a whopping 1,425.9% ROR, but we got it wrong!
It never ceases to amaze me when FOMO hits, because you can be speaking with very rational, intelligent people on one call and host a follow up call with the same person later and they are second guessing everything that is happening and doubting their game plan based nearly solely on a friend’s conversation or a headline they have read! Like Warren Buffet has said many times, “Most investors think they are investing when in reality, they are behaving like traders.” The summer Olympics did little to offer up reprieve from the constant barrage of trash, anxiety and fear that is hitting the headlines on a daily basis!
Fear of a fall Covid variant sending the entire economy back on lock-down was setting in during the early summer coupled with the whole inflation is transient commentary and belief as well. How you could say by looking at the housing, earnings, supply chain disruption, massive amounts of stimulus and still think that everything will be right again in a matter of a quarter or two was ludicrous but believed by many. You cannot think about Wal-Mart and their triple ordering items like bicycles, knowing they will only get 30-40% of their shipment fulfilled and think, this will resolve itself quickly and peacefully in the end. If you were doing any remodeling or building, you could not outrun the massive cost increases for lumber, PVC, HVAC and plywood during the summer and into the fall either. I remember seeing 3-4 2X4’s on the side of the road when returning from work one evening and thinking, should I get out and pick them up, those are worth some money? Then, thank God, my rational voice intervened, and I kept driving.
The Biden tax hikes and infrastructure bill captured much of the debate, fear and worry of the late summer and early fall causing many investors to look at rebalancing out of fear of a change to the capital gains rate. Couple this with the government’s failure to pass a budget caused many sound investors to, once again, show their anxiety and make changes they might later come to regret.
Here we are, sitting in December and you might be thinking, wow this was a great year when, in fact, it was pure euphoria followed by chaos followed by crazy followed by boring followed by a slap in the face and all without XANEX to make things a bit more palatable to handle.
In 2020, it was all the political chaos and social division, and this year, it was a feeding frenzy stoked by the constant chumming of Wall Street by the FED!
Till we speak again, stay patient and keep calm as we wade thru the holidays and expect delays on certain gifts this year (sigh and ugh).
Office Closures this year will be for the 24th for Christmas and 31st for New Years Eve.
BTW: I will be out of the office from the 29th to the 3rd and staff will be here to help with any needs.
General Market Commentary
A more benign reassessment of the possible economic risk posed by Omicron sent stocks sharply higher last week.
The Dow Jones Industrial Average picked up 4.02%, while the Standard & Poor’s 500 advanced 3.82%. The Nasdaq Composite index gained 3.61% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, rose 2.74%.1,2,3
Though much is still unknown about the Omicron variant, reports of potentially milder health effects and the efficacy of booster shots ignited optimism that its economic impact would be less severe than originally feared.
Stocks rallied higher each of the first three days, with strong gains in many of the reopening stocks, such as airlines, travel and leisure, financials, and energy. The performance of high-valuation growth companies was a bit more erratic as they rose and fell sharply throughout much of the week. Weakening Thursday, stocks turned higher on Friday despite a hot inflation number, pushing the S&P 500 to a new record high.4
November’s Consumer Price Index (CPI) came in at a nearly 40-year high, rising 0.8% from the previous month and 6.8% from a year ago. It is the 6th-consecutive month that inflation has exceeded 5%. Core inflation (excluding the more volatile food and energy prices) came in lower, but still posted its sharpest jump since 1991.5
Economists have attributed this elevated inflation rate to strong consumer demand, a shortage of goods due to supply chain constraints, and strong wage growth. How long this high level of inflation persists is unknown, but the Fed has begun considering policy steps to manage it.
This Week: Key Economic Data
Wednesday: Retail Sales. FOMC (Federal Open Market Committee) Announcement.
Source: Econoday, December 10, 2021The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
This Week: Companies Reporting Earnings
Thursday: Adobe, Inc. (ADBE), FedEx Corporation (FDX), Lennar Corporation (LEN).
Friday: Darden Restaurants, Inc. (DRI).
Source: Zacks, December 10, 2021Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
“Never be limited by other people’s limited imaginations.”
– Mae Jemison
Tax Incentives Can Help You Further Your Education
Tax credits help with the cost of higher education by reducing the amount of income tax you may need to pay. The two tax credits available are the American Opportunity Tax Credit and the Lifetime Learning Credit.
Some education savings plans offer tax benefits if the individual qualifies. Also, you may be able to deduct higher-education costs – such as tuition, student loan interest, and qualified education expenses – from your tax return.
If you’ve always dreamed about going back to school, whether to further your career or just to learn something new, knowing your potential tax benefits may save you money.
* This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov6
The Benefits of Brain Training
We know how important it is to exercise our bodies, but exercising our brains is just as important. When we continue to learn, our brains are better for it. Here are just a few benefits from “brain training,” or exercising your brain:
Improved executive functions
Improved working memory
Improved processing speed
Preserved cognitive health
Fewer problems with daily functioning
Better control over mental processing abilities
There are lots of fun ways to exercise your brain, one of which is to continue to learn new things. Attend a pottery, painting, or foreign language class in your neighborhood, or check for any discounts on community college courses. Another great way to exercise your brain is to socialize with others, spend time in nature, and practice mind puzzles, such as crosswords, Sudoku, or a game in a brain-training app.
Tip adapted from the American Psychological Association7
I never ask you questions, yet you answer me all the time. What am I?
Last week’s riddle: You sit down to play chess. Out of the 16 pieces you have at your disposal, how many of them could be used to make your first move? Answer: 10 (eight pawns and two knights).
Glacier hiker explores ice cave, Svínafellsjökull glacier, Skaftafell National Park, Iceland.
Footnotes and Sources
1. The Wall Street Journal, December 10, 2021
2. The Wall Street Journal, December 10, 2021
3. The Wall Street Journal, December 10, 2021
4. CNBC, December 10, 2021
5. The Wall Street Journal, December 10, 2021
6. IRS.gov, June 16, 2021
7. American Psychological Association, June 24, 2021
Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.
U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.
Please consult your financial professional for additional information.
This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG is not affiliated with the named representative, financial professional, Registered Investment Advisor, Broker-Dealer, nor state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.
Copyright 2021 FMG Suite.
Summit Financial Group of Indiana
Licensed in these states: Florida, Illinois, Indiana, Kansas, Kentucky, Maryland, New Hampshire, New Jersey, Ohio, Pennsylvania, South Dakota, Texas, Minnesota, North Carolina, Montana.
Securities offered through Regulus Financial Group, LLC. Member FINRA/SIPC. Investment advisory services offered through Regal Investment Advisors, LLC, an SEC Registered Investment Advisor. Registration with the SEC does not imply any level of skill or training. Regulus Financial Group, LLC and Regal Investment Advisors are affiliated entities. Summit Retirement Advisors, LLC and Summit Financial Group of Indiana are affiliated entities. Summit Retirement Advisors, LLC and Summit Financial Group of Indiana are independent of Regulus Financial Group, LLC and Regal Investment Advisors.