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4th Quarter 2021 Newsletter

   Once again, we have finished a year full of surprises in the Market: the champagne bubbles have barely settled when year-end financial market index returns are published; advisors get out their calculators and measure their performances; Analysts review last year’s Predictions with a mix of trepidation and excitement, as they prepare to publish their outlooks and prognostications for 2022. Much like the weather in our part of the country this year, winds blew hot and cold. On the meteorological front, we experienced extreme temperatures and rainfall whose year-end averages belied the volatile and unpredictable weather we lived through. Similarly, the economy was buffeted by outbreaks of COVID variants, and given a lift by consumer spending stimulus payments. Companies who made unexpectedly strong earnings from a niche in our COVID world watched much of that business fall off, and embattled industries finally enjoyed a tailwind in their struggle to recover from the 2020 Shut Down. When it was all over, even the three bottom equity industries for the year were well into positive territory. All the equity sectors except Emerging Markets, finished the year in the black by a very comfortable margin.
   Griff Curtain’s, “What Happened Last Week,” report for Franklin Templeton, 1/3/22, shows where they landed:[1]

                ·S&P up 28.7%, DJIA up 14.8%, NASDAQ up 22.2%, Russell 2000 up 14.8%, Foreign Equities up    11.8%, Emerging Markets down 2.2%
                ·Top 3 Sectors: Energy up 54.6%, Real Estate up 46.2%, Financials up 35%
                ·Bottom 3 Sectors: Utilities up 17.7%, Consumer Staples up 18.6%, Industrials up 21.1%
                ·Bonds on the other hand were all down for 2021 except Muni’s: 10 Year Treasury down 3.6% / yield 1.5%, U.S. Bonds down 1.5% / yield 1.75 %, Global Bonds down 4.7- / yield 1.31%, Municipal up 1.5% / yield 1.11%

All in all it was a very good year for equities, despite many things not happening the way most of us expected. We have always enjoyed reading year-end retrospectives and coming year outlooks.We share with you below some predictions for the markets from several financial and investment analysts:

“Welcome to 2022 Winds of Change,” from First Trust, featuring Brian S. Westbury, Chief Economist Monday Morning Outlook 01/03/22:[2]

                     After 2 years of unprecedented government actions, the winds of change are blowing hard. COVID should have much less influence on our lives 12 months from now. President Biden’s “Build Back Better Plan” seems unlikely to pass except perhaps in a much smaller form. The Fed will “have its work cut out for it” in handling inflation. The mid-term election could dramatically limit the ability of the Biden Administration to get much done in 2023-24 . . . the most likely possibilities seem to be either a GOP Wave or a GOP Tsunami.

  • The S&P 500 will close up 5.75%
  • The DJIA will finish at 40,000
  • The 10-year Treasury comes in at 2 to 2 ½%
  • Gross Domestic Product is 3%, and Inflation, 4% for 2022

Overall, Mr. Westbury says he is “bullish, but not as bullish as in recent years.”

      Franklin Templeton; Municipal Bond Outlook 12/22/21:[3]

      The outlook for municipal in 2022 is strong for 3 reasons:

  • Supply and Demand will favor them
  • Municipalities, despite challenges, are in a generally sound financial position
  • Market prices “seem reasonable” considering expected inflation and tax rates

The outlook for Equities at Franklin Templeton is for “continued strong, but slowing, global growth . . . high inflation is largely temporary; but risks remain . . . Ongoing supply bottlenecks . . . should ease in the second half of 2022.”

      Bob Doll, Crossmark, Global Investment Strategist, Advisory Perspectives, “10 Predictions for 2022” 01/04/22 (partial list below):[4]

  • U.S. real growth and Inflation are “above trend” but decline from highs of 2021
  • “Core Inflation remains stuck at around 3%”
  • “For the first time since 1958/59, the Ten Year Treasury has a second year of negative returns”
  • Financials and Energy stocks outperform for “only the second year in the decade”
  • “After a 60 year low in 2021” fed actions begin a long term move to higher interest rates
  • “Republicans gain at least 20-25 seats in the House, and barely win the Senate,” in mid-term elections

      Craig Burelle, Senior Macro Strategist, Loomis, Sayles Co., “2022 Marco Outlook: View on Inflation, the Fed, and the Expansion,” 1/4/22:[5]

  • Supply Chain disorders should clear up in the second half of 2022
  • Core Inflation will drop to 2-2 ½% in the second half

Much will depend on how the Fed reacts as they become more hawkish in policy, and back pedal from the “assurance earlier in 2021 that inflation was definitely transitory,”

   Our takeaway from all this is that we will face many challenges in 2022, and must be watchful, prepared, and cautiously optimistic that equity markets may fare better than many might expect. Winnie the Pooh’s friend Piglet, when faced with a powerful wind that uprooted him and sent him flying through the air to his neighbor’s house, became so frightened of the wind that he tied bricks to his feet and hid in his room. It took much convincing by his friends to coax him back outside. Rest assured that we don’t share Piglet’s fear of blustery conditions. We will be quite interested to see where the winds take us throughout the year, and anxious to take advantage of any opportunities uncovered as they blow through.

   We thank you for your support and for the relationships we share with each of you. Have a happy first quarter of 2022; and please reach out to us if you should start thinking about strapping on those brick shoes.



The Galarneau Group



Past performance is no guarantee of future results. The Dow Jones Industrial Average is an unmanaged, price-weighted index of 30 large capitalization stocks with dividends reinvested. Please note that investors cannot invest directly in an index. The NASDAQ Composite is an unmanaged, market capitalization weighted index of stocks listed on the Nasdaq Stock Exchange, reported as price return without reinvestment of dividends. Please note that investors cannot invest directly in an index. Returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment. The Standard & Poor’s 500 Index (“S&P 500”) is an unmanaged, market capitalization weighted index of 500 widely held stocks, with dividends reinvested, and is often used as a benchmark for the U.S. stock market. Please note that investors cannot invest directly in an index. Returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. Amounts withdrawn are subject to income taxes. Withdrawals before age 59½ may also be subject to a 10% federal income tax penalty and plan restrictions.


[1] Griff Curtain, Franklin Templeton, “What Happened Last Week,” 1/3/22.

[2] Brian S. Westbury, First Trust, “Welcome to 2022 Winds of Change,” 01/03/22.

[3] Franklin Templeton, “Municipal Bond Outlook,” 12/22/21.

[4] Bob Doll, Crossmark, “10 Predictions for 2022,” 01/04/22.

[5] Craig Burelle, Loomis, Sayles Co.,“2022 Marco Outlook: View on Inflation, the Fed, and the Expansion,” 1/4/22.

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