Happy Holidays everyone! Winter has arrived in Reno with a bang and all the snow lovers are happy! Elise, my daughter, is finishing up her last licensing exam and expects to be here in the office with me to meet you all beginning in January. We are excited she is joining our Legacy Team!

As I write this letter, the chairman of the Federal Reserve (Fed), Jay Powell, is speaking on the television and discussing their decision today to leave interest rates the same. The markets as of now are close to unchanged, as this news from the Fed is digested.

This year of growth in 2021 is one of the best years we’ve had in nearly 40 years. The U.S. economy bounced back this year from the worst year since the great depression in 2020. Why? A combination of record stimulus, a healthy consumer, an accommodative Federal Reserve, vaccinations, and reopening of businesses all contributed to the big year.

In what amounted to the shortest recession on record, only two months in March and April 2020, the economy came roaring back to produce what is currently expected to be over 5% GDP growth in 2021, more than making up for the 3.4% drop in GDP in 2020.  Of course, there have been hiccups along the way. You can’t shut down a $20 trillion economy and then expect it to get going again without warming up first. Supply chain backlogs, materials and labor shortages, and higher prices all held the economy back to varying degrees. The good news is, demand is still very strong, and as the backlogs unwind (which could take years in some cases), LPL Research expects above-trend economic growth, and they see a low risk of a recession in 2022.

LPL also believes that as the economy moves more to mid-cycle, their forecast is for 4.0 – 4.5% GDP growth in 2022. While this is a slowdown from 2021, it is still a very solid number. LPL expects inflation to tame from 2021 levels to a potential run rate under 3% by the fourth quarter with core inflation numbers lower, a step in the right direction, although it may still be on an upward trajectory the early part of the year.

Globally, Europe and Japan were hit especially hard by the pandemic in 2021. But as COVID-19 cases potentially fall globally, those areas could be ripe for better economic growth in 2022. Meanwhile, emerging market conditions may disappoint as growth in China could be constrained by regulatory crackdowns.

I thought a positive letter based on real data during the holidays would be a welcome arrival in your mailbox. Call us if you have any questions or desire more information. – Mark and Elise

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss. Economic forecasts may not develop as predicted. Stock investing includes risks, including fluctuating prices and loss of principal.  Some of this research material has been prepared by LPL Financial. All indices are unmanaged and may not be invested into directly. Referenced material: LPL Research Weekly Market Commentary dated 12/13/2021, approved tracking #:1-05221199. Approved Tracking #1-05223818.