2021 Fourth Quarter Commentary: And That’s a Wrap

The year 2021 delivered several twists and turns as lingering impacts from COVID-19 led to a more turbulent economic recovery than anticipated. Despite reoccurring outbreaks during the summer and winter months, the US economy made great strides. We saw strong economic growth, rising wages and falling unemployment, and as a result, most risk assets delivered strong returns for investors. A variety of policy and macro risks could steer the recovery off course, but in general, we remain optimistic about the economic path forward in 2022. We expand on our reflections of 2021’s final quarter as well as our expectations for the year ahead in our latest commentary.

Commentary Highlights:

  • The most recently published November economic data points reveal that the economy remains on strong footing. Industrial output, employment, wage growth, and corporate earnings all paint a strong picture for continued recovery in 2022. Unfortunately, some risks and challenges remain, including supply chain bottlenecks and labor shortages.
  • We believe that much of the growth we are seeing was made possible from the unprecedented amounts of fiscal and monetary stimulus that was injected into the economy. Of course, a byproduct of all this stimulus and demand-creation has been increasing levels of inflation, as demonstrated in November’s year-over-year CPI coming in at 6.8%, the fasted pace in nearly 40 years.
  • The COVID situation appears to be evolving toward a more manageable state given the successful rollout of vaccines, improved therapeutics, and an Omicron strain that appears to be a far less severe disease. We expect that the virus will continue to have a waning impact on economies and markets.
  • 2021’s conclusion marked the third straight year where the S&P 500 Index posted double-digit returns. Unfortunately, it will also be remembered as a disastrous year for many discretionary long-short equity hedge funds.
  • Our investment team is optimistic about our asset allocation approach and believes the environment ahead remains a favorable one for alternative strategies. As we’ve said at the start of the year, at such low absolute level of yields, traditional bonds and credits are about as un-investable as they’ve ever been.


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