Please join us for our Q4 2021 Gallagher Financial Markets Update webinar on Thursday, January 13th at 11:00 a.m. ET.
Register todayRecapping 2021
Shrugging off recurrent waves of Covid-19 infections and the emergence of intransigent inflation, investors in 2021 focused on the continued global economic recovery and attendant strength in corporate earnings, driving strong returns across many risk assets for the second straight year.
U.S. Equities: U.S. stocks extended their robust post-pandemic recovery, with the S&P 500 index tacking on a 28.7% total return, following an 18.4% gain in 2020. All S&P economic sectors showed double-digit percentage gains on the year, led by energy stocks (+54.6%). Large cap stocks led the market, while returns were more modest among small cap stocks (Russell 2000 index, +14.8%).
International Equities: Foreign stocks failed to keep pace with U.S. stocks in 2021, with returns tempered by uneven economic recoveries and a rising U.S. dollar. While developed market returns were respectable (MSCI EAFE index, +11.3%, U.S. $ terms), emerging market indices were dampened by weakness in Chinese stocks (MSCI Emerging Markets index, -2.5%, U.S. $ terms).
Fixed Income: Bonds largely struggled as interest rates rose across the yield curve during the course of the year (Bloomberg Barclays U.S. Aggregate, -1.5%). Among the few bright spots were high yield bonds (Bloomberg Barclays High Yield, +5.3%) and TIPS (Bloomberg Barclays U.S. Treasury TIPS, 6.0%—the latter benefiting from investors seeking protection from rising inflation.
REITs: REITs enjoyed a banner year (FTSE NAREIT Equity REITs, +43.2%), rebounding from 2020 losses as economic activity recovered. Strong returns were widespread across all sectors, led by industrial, residential, and retail.
Commodities: Increasing demand and constrained supplies drove rallies across multiple commodities in 2021, pushing the broad index to its best return in years (Bloomberg Commodity, +27.1%). The energy complex was the standout performer as the price of oil jumped more than 50% during the year.