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After a spectacular run this year, the major indices traded lower for the last day of 2021 after some late selling but closed out the year with the strong gains noted below. The S&P 500 Index dropped 0.3% and ended December about 4.5% higher, the third-best month of the year and best December since 2010. The S&P 500 Index set 70 all-time highs during the year, which is the most in a single year since 1954. The market had a lot to overcome last year, and 2022 will be no different.

The start of this year may seem like the beginning of 2021, with surging coronavirus case counts, event cancellations and companies revising their return-to-office plans. The December traffic reports from airlines are due this week. Those updates from the carriers could include new Q4 guidance to factor in the impact of Omicron and operational disruptions. Disruptions could be mitigated by the U.S. considering lowering the Covid quarantine time from ten days to five days, but we will see.

In the bond market, the 10-year Treasury yield ended the year at 1.51%, just below the 50-day moving average of 1.52%, but up from 0.91% at the beginning of the year. The two year Treasury yield closed at 0.73%, up significantly from 0.12% from 12/31/2020. The forecast of two or three Federal Reserve rate increases in 2022 has pushed shorter term yields up over the last couple of months.

The first trading week of 2022 will include an important OPEC+ meeting, the release of the minutes from the last Federal Open Market Committee meeting and the December jobs report. Walgreens, Constellation Brands, and Bed Bath & Beyond will be reporting earnings this week which will give us a gauge on holiday beverage and retail sales. Walgreens’ earnings will provide an update on Covid-19 testing.

We wish you all a happy, healthy and successful 2022, and please lookout for our annual publication, The Long View, in your inboxes later this month.