Fixed income markets were largely negative on the back of rising interest rates early in the month. The eruption of war between Russia and Ukraine and anticipation of tighter monetary policy roiled equity markets, and rising interest rates put pressure on the real estate market and sectors with higher valuations and longer lease terms struggled.

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In 2021, inflation measured by Headline CPI, rose 7.1 percent year-over-year. At their latest December meeting, the Federal Reserve once again acknowledged elevated inflation levels and initiated a reduction in the levels of its net asset purchases by $20 billion for Treasury securities and $10 billion for mortgage-backed securities. In January 2022 and beyond, further reductions in or even the elimination of Quantitative Easing (QE) policies are more likely as well as increase the Federal Funds rate from its 0 – ¼ range.

A more hawkish Federal Reserve sent interest rates higher during the period and fixed income markets broadly sold off. Expectations of tighter monetary policy, elevated inflation and geopolitical tensions sent equity markets sharply down and REITs, which were one of the top performers in 2021, sold off in tandem with the broader equity market.

Our paper details our input assumptions for the investment period from January 2022 to December 2031. It reflects 10-year estimates for asset class returns, standard deviations, skewness, kurtosis and correlations.

Early month concerns over the Omicron variant led investors to seek safety in fixed income assets, pushing up prices. Following drawdowns arising from discovery of the Omicron variant, equity markets across geographies rallied to end the year on a positive note. REITs continued their strong run amid a 40-year high in inflation and rising real estate prices.

With rising interest in Environmental, Social, Governance (ESG) investing the asset management community has been quick to respond. New strategies have been launched, existing strategies have been updated and marketing materials have been created. However, some investors are rightly asking what is marketing and what is reality?

Rates rose during most of the month as the Fed began tapering its asset purchases. US equity markets closed the month lower on COVID-induced selling after gaining over most of the month on strong economic data and Real Assets, REITs and Commodities were all led lower over November by prospects of further lockdowns, especially in European markets.

Global equity markets took a step back in November, with investors favoring safe-haven assets. Emergence of the new Omicron COVID variant and more hawkish comments by the Federal Reserve led to market volatility late in the month.

Rising inflation break evens provided support to inflation-linked securities of all maturities. U.S. equities were driven higher by strong earnings growth, despite supply chain-related cost pressures and REITs continued their strong run year-to-date. Rental prices continue to move higher supporting the residential sector.

Markets Unfazed by October Frights. Equities overcome inflationary pressures and prospects of tighter monetary policy.

More than six months after President Biden outlined key tax policy proposals, taxpayers are still waiting for clarity on tax legislation. Tax negotiations could take quite a few twists and turns over the coming weeks, although taxpayers can ponder several strategies despite current legislative uncertainty.

Our Quarterly Considerations report includes data on Third Quarter 2021 Market Events, Market Themes, Economic Review, Asset Class Performance, Fixed Income Market, Equity Market, Real Asset Market, Diversification and Financial Markets Performance.