I’m writing this with three days left in 2021, looking back on this past year and looking forward to 2022. I have some thoughts to share with you, in no particular order:
- Despite an abundance of government policy miscues effecting oil prices, supply chain delays, and inflation, and despite the administration’s failure to “shut down the virus” as promised, the American economy has rolled along. The stock market is going to end up with significant gains in 2021, coming on top of significant gains in 2020. Your accounts should see returns ranging from 10-12% on the low end to 25-30% on the high end, depending of course on the mix of funds in your respective account.
- Long-time clients and readers of this newsletter know that the news cycle is never without its crisis du jour. For the time being the current crisis is inflation. No doubt inflation is real, but it is not a long-term systemic problem—yet. We know that this current inflation emanated from government policy that flooded the economy with cash from the beginning of, and continuing through, the pandemic. Initially, cash was needed and welcomed, but clearly there is now too much cash chasing too few goods, and we all learned this is the basic definition of inflation back in our Econ 101 days.
- You know that we at The Planner’s Edge think about investing according to three foundational principles: Faith in the Future, Patience, and Discipline. Applying Principle #1 to the current inflation problem, I don’t know how inflation will get solved but I have faith that it will. Applying Principle #2, I don’t know when inflation will get solved but I believe that it will. Applying Principle #3, we should continue to invest in tried-and-true ways that have always worked and avoid new-fangled ways just because they are new.
- There are four things that give me faith that the inflation problem will be solved:
a. If the markets thought that inflation was now systemic and long-term we would see the US dollar falling vs other world currencies and we would see gold rising in price. We don’t see either of things happening—yet.
b. Supply-demand imbalances don’t last long. There is a reason that common wisdom has said “the cure for high prices is high prices.” In other words, high prices both reduces demand and increases supply, bringing markets back in balance.
c. The rate of innovation in our economy has not diminished and we know that innovation consistently works to lower prices. It is a bad bet that inflation will be able to defeat innovation.
d. Current monetary policy isn’t forever and will eventually change direction.
I hope you have found this year’s newsletters informative and helpful in building and maintaining your long-term confidence. With gratitude to both our long-term clients and our newer clients for the trust you have placed in The Planner’s Edge, we look forward to a healthy and prosperous new year 2022. JR
FORWARD LOOKING STATEMENT DISCLOSURE
As a Registered Investment Advisor, one of our responsibilities is to communicate with clients in an open and direct manner. Insofar as some of our opinions and comments are based on current advisor expectations, they are considered “forward-looking statements” which may or may not be accurate over the long term. While we believe we have a reasonable basis for our comments and we have confidence in our opinions, actual results may differ materially from those we anticipate. You can identify forward-looking statements by words such as “believe,” “expect,” “may,” “anticipate,” and other similar expressions when discussing prospects for particular events and/or the markets, generally. We cannot, however, assure future results and disclaim any obligation to update or alter any forward-looking statements, whether as a result of new information, future events, or otherwise. Further, information provided in this letter should not be construed as a recommendation to purchase or sell any particular security.
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