Q4 2021 Passionate Investor

Q4 2021 Market Review and Commentary 

Market Review*

  • Equity markets generally outperformed fixed-income markets with the S&P 500 rising 11.03% (including dividends; +28.71% YTD) and the Barclay’s Capital U.S. Aggregate Bond index rising 0.01% (-1.54% YTD).
  • Small caps underperformed large cap stocks (S&P 500) as the Russell 2000 small cap stock index returned +2.14% (+14.82% YTD).
  • Value underperformed Growth during the quarter (as determined by the S&P 1500 broad market index which includes large, mid, and small capitalization stocks).
  • International or developed, non-U.S. equity markets underperformed U.S. markets in both U.S. dollars (MSCI EAFE**: +2.74%; +11.78% YTD) and in local currency terms (+3.96%; +19.25% YTD).
  • The MSCI Emerging Markets Index underperformed developed, non-U.S. equity markets (international) in both U.S. dollar (-1.247%; -2.22% YTD) and local currency terms (-0.84%; +0.14% YTD).
  • U.S. market sectors were mostly positive during the quarter. Information technology (+16.69%; +34.53% YTD) and materials (+15.20%; +27.28% YTD) stocks were most distinguishable given their strength. Communications services stocks were notable given their weakness (-0.01%; +21.57% YTD). Energy stocks led all other sectors over the full year (+7.97%; +54.64% YTD).
  • High yield bonds fell 0.71% during the quarter (+0.99% YTD). The U.S. corporate bond sector decreased 0.17% during the quarter (-1.93% YTD). 10-Year U.S. Treasury yields climbed slightly from 1.46% at the beginning of the quarter (0.87% at the beginning of the year) to 1.44% currently.
  • The U.S. dollar rose versus the Japanese Yen (+3.21%; +11.54% YTD) and the Euro (+1.88%; +7.06% YTD) but fell relative to the British Pound (-0.45%; +0.91% YTD).
* Unless otherwise noted, performances stated above reflect data provided by Standard and Poor’s, Russell Investments, MSCI, and Barclay’s Capital.
** The MSCI EAFE Index is a large capitalization, developed market benchmark that tracks non-U.S. or international equity markets.

2021 Summary

2021 ended with an eerily similar feel to last year’s close. Stocks ended another turbulent year near all-time highs. Interest rates remained near historic lows. Once again, COVID (in the guise of the Omicron variant) and all its trappings was the 800lb. gorilla in the room. High inflation, arguably present last year as well (e.g., housing, wages, etc.), added to the gloom as prices rose considerably for many goods and services.

S&P 500 – 4Q2021 and Full Year 2021 Performance

Source: FactSet

The S&P 500 outperformed virtually every stock or bond sector over the past year. Bonds trailed stocks in part because of inflation and the threat of higher interest rates to come. Small cap stocks compared poorly to large caps as COVID continued to affect investors’ appetite for the shares. Both international developed and emerging market stocks (in local currency and U.S. dollars) trailed domestic shares by a considerable margin as foreign investors sought safety and better returns in U.S. markets. The U.S. dollar strengthened versus most other currencies (over the full year) for similar reasons.

Tug of War 

COVID and inflation had the largest influence on the stock market last year. However, each impacted stocks in different ways. Small-capitalization value stocks benefited early in the year as the economy continued to normalize after the original 2020 COVID wave. The Delta and Omicron variants that materialized over the summer and holiday season (respectively), generally weighed on these same stocks as the year progressed. The emergence of inflation and its random flareups throughout the year seemed more positive for these companies as many were seen as being nimble and capable of adjusting to higher prices.

Conversely, larger capitalization, growth-oriented stocks outperformed as shares of technology and internet-related companies benefited from the continued COVID environment that extended remote interaction for commerce, work, and socialization. Many of these same stocks performed poorly as inflationary fears appeared sporadically throughout the year. It is generally believed that the high interest rates that often accompany inflation also lowers the value of companies and their stocks. Growth and technology stocks, in particular, are thought to be more adversely affected by rising interest rates as a large amount of their net worth is derived from high expectations of future growth.

The Year Ahead 

Despite the difficulties of 2021, we are encouraged by how the year ended and by what 2022 may bring. Although we do not make forecasts or prognostications about the future (we typically consider this low-probability speculation), we do believe COVID and inflation are factors that will remain front and center in 2022. We also expect interest rates to rise during the year as the Federal Reserve increases its guard against inflation. Additionally, we can never discount other issues which may choose to assert themselves throughout the year (China, Russia, or perhaps something unknown to us at this time). This noise, no doubt, will create some stock market dislocations and inefficiencies (i.e., volatility). As always, existing correlations between stocks and these factors may or may stay constant.

Given these potential disturbances, one may think we have our work cut out for us. However, we would not want it any other way! Recall, our investment strategy takes advantage of opportunities that generally occur when the stock market is volatile. We believe that volatility is a sign of stock market inefficiency that can be exploited over the long term. Taking advantage of these opportunities can allow us to add value for our clients and, in turn, help them to reach their long-term goals. As such, we are hopeful that 2022 will prove friendly towards active and value investors generally and our investment strategy, in particular. We wish you the best in the new year to come.

Questions and Consultations

If you have questions or if you’d like to schedule an appointment to discuss your finances, contact us today.

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Partnership Wealth Management is a comprehensive financial services company. We are committed to providing our clients with financial planning and wealth management services to help them make the most of their investments. At Partnership Wealth Management we have a long history of working with the LGBT community. Among our many services, we offer financial planning for gay couples and lesbian couples as well as estate planning for gay couples and lesbian couples. Financial planning is an important part of preparing for the future, contact us today to get started: www.partnershipwm.com.


The commentary presented herein contains the opinions of Bel/eras Capital Management, a OBA of Partnership Wealth Management, LLC. Partnership Wealth Management, LLC is a registered investment advisor. This information should not be relied upon for tax purposes and is based upon sources believed to be reliable. No guarantee is made to the completeness or accuracy of this information.

Bel/eras Capital Management shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, the information, data, analyses or opinions contained herein or their use, which do not constitute investment advice, are provided as of the date written, are provided solely for informational purposes, and therefore are not an offer to buy or sell a security. Investments in securities are subject to investment risk, including possible loss of principal. Prices of securities may fluctuate from time to time and may even become valueless. This information has not been tailored to suit any individual.

Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended or undertaken by Bel/eras Capital Management, made reference to directly or indirectly by Belleros Capital Management, or indirectly via a source to an unaffiliated third party), will be profitable or equal the corresponding indicated performance level(s). Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client or prospective client’s investment portfolio. Historical performance results for investment indices and/or categories generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the payment of which would have the effect of decreasing historical performance results. For Professional Use Only