If you told me at the end of 2020 that the year to follow would be filled with more uncertainty, lockdowns and global disruption, I’d have thought you were mad. I did not think we could get dealt a crazier hand than 2020.

I would have been wrong. The year that has been has brought with it even more disruption to our daily lives than the previous year. The only difference between the two years as it stands, is that 2021 did not bring with it the market volatility that came with the uncertainty of 2020. It is almost as though markets are beginning to accept the current world we are in, for all of its positives and negatives.

Last year we saw a market correction between February and March of around 25-30% across a range of global markets. These recovered very quickly, and sent us in to 2021 with a burst of momentum that has led to strong market growth for the year. This has been assisted absolutely by global (particularly USA) monetary policy and general money printing, which has resulted in record inflation levels now. These record inflation levels will need to be adjusted and accounted for at some stage, but is it unclear when markets will consider the overarching impacts of these policies.

For 2021, as at the date of this email, the US S&P500 has had a total growth of over 25% for the 2021 calendar year, with the ASX 200 growing a little more modestly at just over 11% for the year. These are off the back of a strong recovery in the second half of 2020.

The discrepancy between the Australian and US returns does highlight the difference in countries monetary policies and attitudes, with Australia not being as trigger happy to print more money as the US, with the hopes of a more natural and sustainable recovery in the longer run. The discrepancy also highlights the importance of diversification, and having an exposure to all global markets!

With the hope for a steady close to 2021, we must look forward to what we may expect in 2022. If this year has proven anything, it is that the events of the next year are as uncertain as this summer’s weather patterns. It is almost impossible to know exactly what will greet us around the corner. Logic would indicate that we may see a slowing in market growth off the back of an aggressive two years, however this is no guarantee.

I know I say this time and time again, but it is as true as the first time I said it. It is impossible to know what the world around us will produce, so we must instead focus on our own actions. The best way to be prepared for whatever 2022 has in store for us is to have an individually tailored plan, with an asset allocation that is suitable to your own needs and goals that is appropriately diversified. That’s what we spend our time working towards. The rest should then become background noise for long term investors.

With that in mind, I want to take the opportunity again to wish you and your families a very Merry Christmas, and a Safe and Happy 2022 – with whatever it has in store for us!

Best Wishes,
Sam

Important Notice:  The information provided in this post must only be considered general advice. It has been prepared without taking into account any persons individual objectives, financial situation or needs. Before acting on anything in the article, you should consider its appropriateness to you, having regard to your objectives, financial situation and overall needs.