Investors displayed an appetite for risk and volatility in 2021 – a year of social-media-created meme stocks such as AMC Entertainment, GameStop and Robinhood Markets. Special Acquisition Companies (SPACS) brought mostly unprofitable companies public. We experienced Initial Public Offerings of which 70% were losing money. Over a 4-day period in December, we saw Tesla’s market capitalization increase by over $200 billion, more than the total value of General Motors and Ford combined. More than 300 unprofitable companies fell more than 50% from recent peaks. All this plus speculation in Crypto Currencies and Non-Fungible Tokens.
With the above taking place in the background, The Standard & Poor’s 500 Stock Index rose to new all-time highs albeit, with unusually high volatility. The gains were driven by shares of high-quality technology stocks and other companies showing strong earnings. The business environment was complicated, highlighted by low interest rates, Federal Reserve monetary stimulus, effects of the Covid-19 virus and supply chain disruptions. Investors with patience and discipline who focused on profitable well managed companies were rewarded.
We cannot predict what 2022 will bring, however we look forward with optimism. Our economy remains strong, and unemployment low as we enter the New Year. We will remain disciplined and focused on the quality companies we expect to provide solid long-term returns, balanced with appropriate allocation to fixed income securities to manage risk.
I wish you a new year of peace, joy, and good health.