The good from 2021….. Heck, it wasn’t 2020 !!!! Seriously, it could have been worse. Economically, we are all collectively recovering from the pandemic. Yes, supply disruptions and poor policy decisions (in my opinion) have led to hiccups, but we are moving forward. Employment is coming back, and with a vengeance. Labor rates are also rising but (again my opinion) it was way overdue. Not necessarily a bad thing. Especially in light of technology and process enhancements which will drive rises in productivity. The optimistic view has legs and that’s a good thing. Financially, portfolios are up, and people have more money in their checking accounts. Emotionally, people are feeling better as the clouds have lifted. Um…until now and the “dreaded Omicron variant”. More on that below.
The not-so-good from 2021….. Life moved on and so did the eventual ending. This year saw the passing of 4 of our clients as well as my own father. I believe it’s one part of this job that doesn’t seem to ever get easier. I do take solace that a life well planned is always easier on the survivors, and I cherish my role in that. On a human level, we enjoy each and every one of our clients and feel a real kinship. The passing of a friend is never easy. Personally, It’s a reminder to always give lots of hugs, tell people you love them, and live life to the fullest every….. single…….day. Tomorrow is never guaranteed, and life can change with an incoming phone call. If you take anything from the ranting’s series…. please take this one to heart and make someone you love smile today.
Looking ahead, 2022 is appearing to be the year where some level of inflation finally creeps into the American psyche. “Wage push” inflation (remember that one from econ class) is a thing. Add that to commodity cost increases and you can expect the matrix (er…. Media) to be in full throat. Guessing the gold bugs and crypto people will pile in too. While the popular message will be a lot of “arm waving”, we expect things to be more cyclical than permanent. Interest rates and the cost of money must go up. As written about in prior rantings, the cheap money punch bowl is being removed and the economy will have to stand on reasonable cost of capital assumptions. As with any cyclical direction change, there will be casualties. The over leveraged, the over concentrated, and the under diversified being the obvious candidates. While we are not portending another market crash, we do believe prudence to be wise and discipline in one’s allocation as very important. This isn’t the time to be out over your skis or leveraging the farm… The contra issue with those things is the aforementioned “Omicron”. We collectively knew it (or something like it) was coming. Viruses always mutate and this one is no different. In most cases the mutations don’t become more toxic, but a step on the way to being “endemic”. As this new one hits the news, it offers a yang to the yin of the “rising interest rate, strong economy” story. When that happens, expect volatility. Yes, days of a thousand-point swings in the Dow are back in play. As we have said numerous times recently, be neutral in your allocation or maybe a little less. Markets will gyrate and one’s long-term success is based on their ability to keep the faith in good times and the not-so-good. Not predicting imminent declines but always better to be looking ahead and ready to rock if things change.
As always, we are here for you and your family. If you would like to chat about anything, don’t hesitate to reach out. Whether it be a portfolio review, economic talk, bitch about the news, or just get something off your chest… we are here. Not only as financial advisors but sometimes just a friendly ear. Good luck on your holiday planning and talk soon. Best of everything!