As 2021 comes to a close, will 2022 be more of the same?
Bidding farewell to 2021, the pandemic that has shaped the economic and market backdrop since early 2020 continues to rage and cause uncertainty for businesses and investors around the world. The impact has been wide ranging from supply chains to staffing issues with investors trying to navigate the everchanging landscape.
The TSX closed the year with a gain of 21.7% driven mainly by the performance of the energy sector as the price of crude rallied due to mobility restrictions being lifted and improving expectations for overall economic activity. The financial sector was also a strong contributor to the index performance bolstered by expectations of rising interest rates and favorable valuations.
The S&P500 gained 26.9% for the year driven primarily by the strength in earnings reported throughout the year across multiple sectors. The mega-cap technology stocks in the index contributed positively to its performance during the year.
The stimulus party which fueled a large part of the stock market’s recovery from the lows reached in March 2020 is slowly wrapping up with the Federal Reserve announcing plans to end its bond buying program by March 2022. Markets are pricing in several rate increases by the Fed throughout 2022 with continued increases expected into 2023.
The inflationary pressures that have been felt throughout the past year are seemingly more entrenched than previously thought with the Fed removing the “transitory” label given the degree to which supply chain challenges and wage pressures have added to the inflation narrative.
There will continue to be pressure on fixed income with the rising interest rate environment. Active management within the bond sector will likely be key to maintaining good performance. Overall, yields are expected to remain somewhat constrained.
On the equity side, the consensus is that the pandemic will run its course this year and the economy will revert to a more normal course in 2022. This bodes well for the overall markets, though the gains should be more muted and normalized than over the previous 18 months. Expectations of continued strong earnings growth will help push the markets forward in 2022.
We continue to ensure diversification of Manulife Private Wealth’s portfolio are maintained through our strategic global asset allocation while also recognizing the potential volatility caused by both the pandemic and geopolitical tensions and associated political uncertainty in various regions around the world.
As a result, there continues to be a strong case for alternatives such as real estate, infrastructure or private equity to ensure long term performance and smoother returns.
Should you have any questions the Manulife Private Wealth team are here to help. Wishing you the very best in the New Year.
Important disclosures
A widespread health crisis such as a global pandemic could cause substantial market volatility, exchange trading suspensions and closures, and affect portfolio performance. For example, the novel coronavirus disease (COVID-19) has resulted in significant disruptions to global business activity. The impact of a health crisis and other epidemics and pandemics that may arise in the future, could affect the global economy in ways that cannot necessarily be foreseen at the present time. A health crisis may exacerbate other pre-existing political, social and economic risks. Any such impact could adversely affect the portfolio’s performance, resulting in losses to your investment.
The material contains information regarding the investment approach described herein and is not a complete description of the investment objectives, risks, policies, guidelines or portfolio management and research that supports this investment approach. Any commentary in this report is provided for informational purposes only and is not an endorsement of any security or sector. The opinions expressed are those of Manulife Private Wealth as of the date of writing and are subject to change. The information in this document including statements concerning financial market trends, are based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. This material does not constitute an offer or an invitation by or on behalf of Manulife Private Wealth to any person to buy or sell any security. Past performance is no indication of future results. The information and/or analysis contained in this material have been compiled or arrived at from sources believed to be reliable but Manulife Investment Management does not make any representation as to their accuracy, correctness, usefulness or completeness and does not accept liability for any loss arising from the use hereof or the information and/or analysis contained herein. Neither Manulife Private Wealth or its affiliates, nor any of their directors, officers or employees shall assume any liability or responsibility for any direct or indirect loss or damage or any other consequence of any person acting or not acting in reliance on the information contained herein. Please note that this material must not be wholly or partially reproduced.
Manulife Private Wealth is a division of Manulife Investment Management Limited and Manulife Investment Management Distributors Inc. Investment services are offered by Manulife Investment Management Limited and/or Manulife Investment Management Distributors Inc. Banking services and products are offered by Manulife Bank of Canada. Wealth & Estate Services are offered by The Manufacturers Life Insurance Company.
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