ADVISOR ANALYSIS: Monthly Observations from CIO, Chris Zaccarelli
Markets in Review
The stock market bounced back from last month’s drop, rising 4.4% in the final month of the year, which brought the S&P 500’s full year gains to 26.9%. The MSCI All Country World index also rose, up 3.9% in December, increasing its full year gain to 16.8%. Bonds fell, with the Bloomberg BarCap U.S. Aggregate Bond index dropping 0.25% during the month, which left it with full year losses of -1.5%.
During the Fed’s final meeting of the year they discussed increasing the pace of their bond tapering, meanwhile, the new omicron covid variant spread widely causing major businesses to delay their return-to- office plans again. Despite all of the negative news, stock markets pushed higher and staged a Santa Claus rally into the final week of the year.
Monthly Highlights
The Federal Reserve signaled increased urgency in fighting inflation Many companies have paused their return-to-office plans
A Santa Claus rally pushed the stock market to another all-time high
News in Review
Below are some stories that caught our eye this past month. To learn more, follow the links to the full article.
Fed's First Rate Hike Could Come in March and Taper will be Accelerated
The Fed met in December and decided to increase the speed of tapering its asset purchases. Even with the increased reduction in bond purchases, the Fed’s balance sheet will still approach $9 trillion, which many believe is contributing to inflation. For this reason, the Fed also indicated that its first rate hike would come after they have completed tapering in March ’22, however, it wasn’t apparent whether it would come immediately (e.g. in March) or whether they would wait a couple of months (e.g. until May).
Omicron Puts Brakes on US Return-to-Office Plans
The omicron variant has caused many large US companies – such as Apple, Ford, Fidelity, and Facebook (now called Meta) – to postpone their return-to-office plans. Up to half of all employees in the US said that their jobs could be done remotely on a permanent basis, but a hybrid (i.e. work from home and from the office) model is the most likely one to gain traction in the future.
Monday Surge Sparks Santa Claus Rally
The final five trading days of a year (and the first two in January) are often a period in which stocks increase and the so called “Santa Claus Rally” is something that investors are hoping for this year. After a stop-and-start year of openings and then a resurgence of the omicron variant, the stock market continued to move higher throughout 2021. Since the last week of the year is quiet, it’s possible that this year will be one where the existing trend continues into 2022.
British Bank Accidentally Pays Out $175 Million to Customers
A British bank called Santander mistakenly doubled every transaction they did with customers on Christmas Day – with a total of 2,000 customers and 75,000 transactions totaling $175 million. The accident was caused by a “technical” error and the bank is in the process of reclaiming the excess money.
DISCLOSURES
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Independent Advisor Alliance, a registered investment advisor. Independent Advisor Alliance and Blackbridge Financial are separate entities from LPL Financial. The opinions expressed in this material do not necessarily reflect the views of LPL Financial.
This newsletter was written and produced by the Independent Advisor Alliance, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
S&P 500 INDEX: The Standard & Poor's 500 Index is an unmanaged, capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
NASDAQ 100 INDEX: The Nasdaq 100 Index is an unmanaged, capitalization-weighted index of the largest 100 non-financial stocks traded on the Nasdaq market. Unlike the S&P 500 it does not represent all major industries and may be more volatile than more broadly constructed indices.
MSCI ACWI INDEX: The MSCI ACWI captures large- and mid-cap representation across 23 developed markets (DM) and 24 emerging markets (EM) countries. With 2,495 constituents, the index covers approximately 85% of the global investable equity opportunity set.
Bloomberg U.S. Aggregate Bond Index: The Bloomberg U.S. Aggregate Bond Index is a broad-based index of the
U.S. investment-grade, fixed-rate bond market, including both government-related and corporate securities and mortgage-backed and asset-backed securities.
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