Fourth Quarter 2021 Market Review
By Gary Campbell, CFA®
Market sentiment in the fourth quarter of 2021 was dominated by another wave of Covid-19 and fears about rising inflation. There were also concerns that economic stimulus measures – such as stimulus checks, unemployment benefits, child tax credits – were coming to an end. This combination of expected higher inflation coupled with slower economic growth resulted in fading consumer sentiment.
During the fourth quarter, job openings remained at record levels while the unemployment rate dropped to 4.2%. This has created what has been called the “Great Resignation,” a phenomena in which millions of people each month are changing jobs to improve their pay and lifestyles, and many more are leaving the workforce entirely. As a result, average hourly earnings grew 4.8% in November, driving up labor costs. This trend will continue as companies raise wages and offer bonuses to attract workers.
Stocks continued to produce high returns with the S&P 500 rising 11.0%. Non-U.S. stocks were hurt by the rise in the U.S. dollar, meaning the return for U.S. investors was up only 1.8% as measured by the MSCI ACWI ex-USA Index.
Given the rising concerns about inflation, bond returns were generally flat to negative. The 10-year U.S. Treasury yield ended 2021 at 1.52%, unchanged over the course of the quarter. Treasury Inflation Protected Securities sharply outperformed the broad bond market for the quarter and the year as inflation expectations rose.
For PCA retirement plan participants who utilize the Target Date Funds, real estate exposure through the JP Morgan Diversified Commercial RE Fund had a notable quarter and year. During the quarter, the fund experienced its strongest gross quarterly return (8.9%) since its inception in 2015. The full-year 2021 gross return was 23.7%. This is an example of why careful asset allocation across broad assets classes is so important .
Once again, we thank our participants for the trust they have given us with their retirement assets. If you have any questions about your personal retirement plan, please do not hesitate to call us. Helping you navigate the challenges of retirement planning is our greatest desire.
To view a comprehensive report on the latest performance of the PCA retirement plan, visit pcarbi.org/ https://pcarbi.org/retirement/investment-options/.
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