Fortis Wealth Management

(888) 336-7847

www.investfortis.com

January 2022
Market Update
(all values as of 09.30.2024)

Stock Indices:

Dow Jones 42,330
S&P 500 5,762
Nasdaq 18,189

Bond Sector Yields:

2 Yr Treasury 3.66%
10 Yr Treasury 3.81%
10 Yr Municipal 2.63%
High Yield 6.66%

YTD Market Returns:

Dow Jones 12.31%
S&P 500 20.81%
Nasdaq 21.17%
MSCI-EAFE 12.90%
MSCI-Europe 12.10%
MSCI-Pacific 13.80%
MSCI-Emg Mkt 16.80%
 
US Agg Bond 4.44%
US Corp Bond 5.32%
US Gov’t Bond 4.39%

Commodity Prices:

Gold 2,657
Silver 31.48
Oil (WTI) 68.27

Currencies:

Dollar / Euro 1.11
Dollar / Pound 1.33
Yen / Dollar 142.21
Canadian /Dollar 0.73
 

Macro Overview

A year after COVID-19 changed the course of travel, social interaction, and financial markets, 2021 experienced a more rapid market rebound than most analysts anticipated.

Inflation, caused in part by supply chain constraints, tight labor market conditions, and increased money supply, is expected to linger well into 2022 with little abatement as underlying inflationary pressures persist. Some economists are even projecting stagflation to become an issue in 2022 if economic growth sputters and inflationary pressures persist.

Labor shortages continue into 2022, leading to wage inflation and challenges for employers who are attempting to fill more than 10 million open positions nationwide. Workers are quitting their jobs at record levels, transitioning to higher-paying positions and new occupations.

The Federal Reserve is on course to start removing monetary stimulus from the economy and begin raising short term rates as soon as March in an attempt to curtail inflation. Federal Reserve governor Christopher Waller described current inflationary pressures as “alarmingly high.”

A gradual end to lockdowns in 2021 enabled the world economy to begin recovering last year. However, the recent emergence of new coronavirus variants threaten to once again derail economic recovery efforts across the globe.

Volatility due to uncertainty affected financial markets throughout 2021, distorting economic data and possibly misleading Federal Reserve members as they took steps to shape monetary policy. Central banks from several countries began to raise short-term interest rates in their efforts to combat inflationary threats in both developed and emerging economies.

U.S. Census Bureau data revealed that for the first time ever immigrants surpassed the number of births for the past census year that ended July 2021. Population growth was driven by 245,000 net entrants into the country, versus only 148,000 net births.

Sources: Federal Reserve, Census Bureau, CDC, Labor Dept., Treasury Dept.

 
The 10 year treasury yield rose from 0.93% to 1.52% over the past year

Rates in a Steady Climb – Fixed Income Overview

Various fixed income analysts expect a reversal in downward trending rates as the Fed prepares to start raising short term rates as early as the first quarter of 2022.

The Fed is on track to shrink its balance sheet of mortgage and treasury bonds sooner rather than later. The market’s expectation is that the Fed will continue selling off portions of its $8.76 trillion balance sheet over the next few months. This activity is a form of tightening monetary policy, signaling a deliberate attempt to combat inflation by slowing debt-fueled economic expansion.

The 10 year treasury bond yield rose in the final trading days of 2021 to 1.52%, up from 0.93% at the end of 2020. Corporate bond yields also rose for the year. (Source: U.S. Treasury)

Equity Markets Surprised to the Upside In 2021 – Global Equity Overview

All sectors of the S&P 500 Index posted gains in 2021, with the energy sector leading, following a dismal performance in 2020. Real estate, technology and financial sectors led the markets in 2021.

Domestic equity markets were resilient to the challenges brought about by the pandemic, fairing better than developed international and emerging equity markets in 2021. Massive fiscal and monetary stimulus aided U.S. companies amid supply constraints and labor shortages.

Large U.S. companies absorbed higher production costs and passed them along to consumers in the form of higher prices while maintaining favorable profit margins. This scenario was beneficial for stocks of companies that exhibited these characteristics. (Sources: S&P, Bloomberg)

States That Lost & Gained Population During The Pandemic – Lifestyle Trends

As reported COVID-19 infections swept the nation in 2020 and 2021, states differed on restrictions and guidance surrounding the pandemic, prompting many to migrate to another state.

Health, jobs, housing, and quality of life were all factors in influencing Americans to leave for other states. Births and deaths were also a factor in the growth and decline of states’ populations, yet not as significant as migration.

From 2020 to 2021, Idaho, Arizona, Texas, and Florida were the states that saw the largest population increases, while New York, Hawaii, California, and Massachusetts were the states with the steepest declines. (Source: U.S. Census Bureau)

 
Life expectancy for all Americans in 2019 was 78.8 years falling to 77 years in 2020

Life Expectancy Drops – Demographics

Recently released data by the Center for Disease Control and Prevention revealed that life expectancy in the U.S. declined by 1.8 years in 2020. The two leading causes of death in 2020 were heart disease and cancer. Life expectancy for Americans in 2019 was 78.8 years, falling to 77 years in 2020.

The U.S. Department of Health & Human Services tracks several factors contributing to life expectancy, including age, gender and race. The most recent data revealed that females are estimated to live to age 81 while males are expected to live to 76, a five-year difference. Financial planners often take this into account when projecting required income stream cash flows.

Medical advancements and improved living conditions over the decades have led to a gradual increase in life expectancy. In 1860, life expectancy was 39, increasing to 69 in 1960, representing a 30-year life span increase over the course of 100 years. (Sources: U.S. Department of Health & Human Services, CDC)

Record Mortgage Issuance Expected To Continue  – Housing Market Overview

A robust housing market led to a record number of mortgages issued in 2020, with over $4 trillion in mortgage loans issued as reported by the Mortgage Bankers Association. A stampede to refinance and purchase is expected as rates begin to rise in 2022.

Low interest rates, work-from-home transitions, and rising wages all contributed to an ongoing demand for homes nationwide. Rising rates over the past two months have marginally slowed the pace of refinances, but home purchases continued undeterred.

For some homebuyers, rising home prices have put homeownership out of reach even with low interest rates and higher wages. The Federal Reserve Bank of Atlanta found that mortgages became notably less affordable relative to income last year. It revealed that Americans needed about 29% of their income to make mortgage payments on a median-priced home in early 2021, rising to 33% in October 2021. (Sources: Mortgage Bankers Association, Federal Reserve)

 
Americans received over $1 trillion in Social Security benefit payments in 2021

Medical Positions Represent Highest Paying Jobs Heading Into 2022 – Labor Market Overview

The U.S. Bureau of Labor Statistics compiled wage data across various industries and found that 14 of the nation’s top 20 paying occupations are in the medical field. Psychiatrists, surgeons, and anesthesiologists top the pay list, along with airline pilots and chief executives.

Advancements in medical technology and changing demographics have created a growing demand for medical specialists and general practitioners. Medical industry positions include those in private practice as well those at a hospital or medical group. (Source: Bureau of Labor Statistics)

Over $1 Trillion Paid Out In Social Security Benefits In 2021 – Retirement Planning

As of November 2021, over 69.9 million Americans received Social Security benefit payments year-to-date, with over 51 million age 65 or older. The Social Security Administration estimates that Americans received more than $1 trillion in Social Security benefit payments in 2021. Total annual benefit payments have nearly tripled in the past 13 years, up from $361 billion in 1997.

In 1940, the future life expectancy of a 65-year-old American was 14 years; today it’s about 20 years. By 2036 there will be almost twice as many older Americans eligible for benefits as there are today, from 41.9 million to 78.1 million. The recent drop in life expectancy to 77 years of age is not expected to affect benefit outlays to a significant extent.

The latest annual report issued by the trustees of Social Security and Medicare noted that, by 2034, the program’s trust fund will be depleted, meaning that Social Security recipients will no longer receive full scheduled benefits. Recipients would receive about three-quarters of their scheduled benefits after 2034, unless Congress uses its legislative authority to fortify the program’s financial position.

Social Security’s largest costs are attributable to Medicare, which represents over 76% of Social Security benefits. The trustees noted that the aging population of the country has placed pressure on both the Social Security and Medicare programs. The Social Security Administration considers various factors in projecting its estimates, including fertility, immigration, wages, health, and economic growth. (Sources: https://www.ssa.gov/oact/TR/2019/index.html)

 

*Market Returns: All data is indicative of total return which includes capital gain/loss and reinvested dividends for noted period. Index data sources; MSCI, DJ-UBSCI, WTI, IDC, S&P. The information provided is believed to be reliable, but its accuracy or completeness is not warranted. This material is not intended as an offer or solicitation for the purchase or sale of any stock, bond, mutual fund, or any other financial instrument. The views and strategies discussed herein may not be appropriate and/or suitable for all investors. This material is meant solely for informational purposes, and is not intended to suffice as any type of accounting, legal, tax, or estate planning advice. Any and all forecasts mentioned are for illustrative purposes only and should not be interpreted as investment recommendations.