The optimism of high expectations can either be highly motivational or grudgingly disappointing.
Did 2021 meet your expectations?
Going into 2021 most people were fairly optimistic that 2021 would bring an end to the COVID pandemic and a return to normal life. Those high expectations were seeded by the lows of 2020, and 2021 simply could not meet them.
The financial markets probably exceeded initial expectations and continued to build on the recovery which began in March 2020.
A concentration in top tech companies pushed the S&P 500 higher than most other asset classes while most individual stocks around the world finished with modest gains (and more than a few with losses).
Inflation definitely exceeded expectations in 2021 as seemingly unlimited money pursued supply-constrained goods.
What are your expectations for 2022?
On the pandemic front, my expectations are fairly low for 2022. It seems that by the time we identify a new “variant of interest” it is already spreading globally despite any measures to stop it. It appears the vaccines that pharmaceutical companies developed are fairly effective at reducing symptoms, but are more like an annual flu shot than a true vaccine. My expectation is that 2022 is the year that people start seeking normalcy over victory and acceptance starts to outweigh fear.
The financial markets are even more unpredictable than the pandemic. I believe two of the most important challenges facing companies for 2022 are how to solve supply chain and employment challenges and whether the Federal Reserve can properly navigate reducing inflation expectations without crashing economic growth. Of course, there will likely be an unknown challenge or two just to make 2022 interesting.
The growth rate of inflation may be close to peaking on a year-over-year basis. The real question is whether it remains at its current elevated level throughout 2022 or gradually subsides over the course of the year. My expectation is for the latter as supply chain issues are resolved and the Federal Reserve pivots to inflation control mode.
My real expectation for 2022 is that it will day-by-day ebb and flow with cold and warm, joy and sadness, and greed and fear.
Our resolution, as it is every year, is to serve our clients faithfully by helping them look beyond the clutter of daily ebbs and flows with sound long-term advice that keeps them on their desired path.
Quote of the week: Donald Rumsfeld: “I would not say that the future is necessarily less predictable than the past. I think the past was not predictable when it started.”