“May we live in interesting times,” and “All Things Work Together for Good,”
These have been repeated themes for me over the years, and they continue to manifest themselves. Let’s do a quick review of the past two years: COVID became an intense reality to many of us the week of March 12, 2020. Everything closed down that week. Highly anticipated events like March Madness Basketball were canceled just 5 days before it was set to begin, an unprecedented move since the creation of March Madness in 1939. While we thought we’d be back by mid-April to early May 2020, now in January 2022, things are still COVID concerned with closings in effect, travel limited, and positive tests rising even among the vaccinated.
The stock market plunged in March of 2020 closing down 23.2% for the worst quarter since the 4th quarter of 1987. As we saw the ghost-town-like streets and the plethora of empty businesses in the early days of COVID, few expected that the stock market would rebound to unprecedented highs – and then to new unprecedented highs!
The real estate markets flourished in many areas of the country. Many workers found they could contribute remotely and, therefore, could live where they wanted. While residential prices have increased dramatically, actual home sales have also increased. There was not enough inventory for the current demand.
While people were confined to their homes, long-time projects, or deferred maintenance projects were completed. The construction industry prospered, though material shortages and available workers were problematic.
Consumer demand and shopping fluctuated with brick-and-mortar shops, though the overall trend shows a nearly 10% year-on-year growth. Since individuals didn’t leave their homes, online shopping increased even more with over 30% growth for the same period. Out-of-stock problems occurred, and consumers shifted their loyalties. Only 13% of consumers remained brand loyal. The 2021 holiday season is an example of pent-up demand. It experienced a record-breaking season.
Hospitality, hotels, and food services did not fare well in 2020. Many did not survive. Those that did have been able to rebound some in 2021, yet now they are experiencing significant labor shortages and problems. One restaurant owner said that his dishwasher showed up one day and told them that he would be back in 2 – 3 weeks. He gave them a couple of hours’ notice. When he came back several weeks later, they hired him back.
COVID concerns continue. During the holiday season of 2021, people still wore masks, practiced safe-distancing, and wanted to do events outdoors if they could. New COVID cases are escalating especially among the unvaccinated. Labor issues prevail everywhere. Is it an anomaly that the financial markets and real estate prices are at record highs, and the 2021 holiday season is merry and bright?
Some other factors warrant consideration for the new year. Inflation, initially thought of as transitory, appears to be more of a reality. Solving the supply chain debacle may not completely resolve the problem. The Federal Reserve proposes to raise interest rates around 3 times in 2022, though some analysts think this will be postponed until mid-year.
The stock market tends to react negatively to rate increases – a rate shock. This has not happened yet and could be forthcoming. At Morris Financial Concepts, we do not recommend getting out of the market. We do recommend reviewing your long-term investment strategies and rebalancing the assets to correlate with this strategy. Our financial advisors and experienced investment advisors at Morris Financial Concepts, Inc. do our best to keep your desired balance and financial goals in perspective.
Taxes are another area that increases concern as we look at 2022. The proposed tax increases will not affect taxable incomes below $400,000 for single filers and $450,000 for married filing joint filers. Above these levels, the potential for an increase in taxes may come to fruition.
Hope is my word for 2022. Even though we have inflation rearing its head, wages are stronger and may offset some of the effects. Interest rates may rise, and this causes volatility, yet it also creates opportunities. To confront and stay on top of these concerns, your tools are planning, looking ahead, controlling spending, and monitoring investments to maintain your desired strategic balance.
Try the mantra – “all things work together for good.” Hope and focusing on the good are a foundation – a mindset. They withstand the fluctuations of other daily dramas, and they cost little to nothing. They are found by sharing time with others, enjoying a sunset, romping on the beach, or creating something fun. In 2022, spend time in gratitude and finding the good that is around you. Our interesting times become just that – interesting.
If you want to go over anything, please don’t hesitate to contact our CERTIFIED FINANCIAL PLANNER™ professionals.
Kyra Hollowell Morris CFP®, EA, MBA