January 2022
By Mark FisselPosted on January 27th, 2022
2021 Market Market Review
from Clint Edgington, CFA
| As is usually the case, the headlines of a year that are memorable are generally negative. 2021 will likely be remembered for its contested Presidential election, events at the US Capitol, and the continuation of the Covid-19 virus and its various variants. Yet the market is a discounting machine, constantly estimating future cash flows from various investments and weighing it against the inflation that will affect the value of those cash flows and the future interest rates that can be invested into. While these headlines are interesting, our economies and markets are still playing out the world’s reaction to the Covid-19 virus. The virus scared economies and consumers and temporarily shuttered businesses. Yet the underlying global economy was extremely healthy. Governments and central bankers, not knowing the depths of the potential ramifications of the virus on their economies, acted quickly and with strength, doing all they could to both drive interest rates down (monetary stimulus) and pump money into the real economy (fiscal stimulus). This stimulus created the economic effects we saw in 2020 and continued in 2021. These trends are unique; higher inflation, higher risk-based asset prices, with assets that can’t keep up with inflation hurting. Very positive global equity market returns with negative fixed income returns doesn’t happen often; and 2 years in a row hasn’t happened for almost 50 years. Our commentary this year echoes the commentary we put forth last January: “It’s difficult to think about how the immense amount of money pumped into our economy by the monetary and fiscal stimulus works; that the money pumped in has to bubble back up somewhere. While savers in low risk investments or cash effectively finance this through lower valued future dollars and lower interest rates, stock investors generally gain. And they did…. As 2021 begins, where does that leave us? Has stimulus done its twofold job of permanently resuscitating our economy and inflating asset prices? My guess: yes.” |
Build Back Better Act Delayed
By Anne Zavaglia, CFP®
The Build Back Better Act passed in the House in November. The $1.75 trillion social spending bill would advance key parts of President Joe Biden’s economic agenda, and extend the child tax credit for another year.
Senators Joe Manchin (D-West Virginia) and Kyrsten Sinema (D-Arizona) halted Biden’s original $3.5T proposal from advancing. Sen. Manchin, still having concerns about the true cost of the bill, has halted the latest rendition from advancing again. Democrats are holding on to hope that the bill will pass in 2022.
The IRS has announced Cost-of-Living adjustments for contribution limits to 401(k)s and other qualified plans for 2022. Contributions to IRAs will remain the same. See the chart below to see how the changes will affect you.
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Are You a Henry? Consider These Wealth-Building Strategies
HENRY is a catchy acronym for “high earner, not rich yet.” It describes a demographic made up of young and often highly educated professionals with substantial incomes but little or no savings. HENRYs generally have enviable career prospects, but many of them feel financially stretched or even live paycheck to paycheck for years, especially if they are working in cities with high living costs and/or facing large student loan payments.
Building Blocks for Financing College
Financing a college education with the least amount of debt involves putting together a variety of resources in the most favorable way for your family. It requires planning, savings discipline, an understanding of financial aid, smart college research, and good decision making at college time