As 2021 comes to an end, we cannot help but get a bit choked up with gratitude. There is simply so much to be thankful for, starting with you, our clients, our readers. It’s great to think that we have walked together through the markets this year, together! For that we are extremely thankful and cannot imagine going through this adventure without your trust and friendship.
At the outset of 2021, we hoped that by this point we would be “back to normal.” This had various meanings to so many people. And despite the pandemic, social unrest, and COVID continuing to snarl ferociously, 2021 was a good year to be an investor. However, we are still facing challenges from COVID economic setbacks and the realities of an ongoing pandemic.
When I look back at all the “predictions” thrown out there back at the end of 2020 for 2021, and it is remarkable how wrong so many of them were. One that did end up coming up surprisingly strong for 2021 was corporate earnings. I looked back at the insight from one year ago. In our commentary from December 2020, we had projected on 12/03/2020 that 2020 S&P 500 Operating Earnings per Share would end up being 120.86. It ended up being 122.38 when all the data was released officially by the end of March 2021. This year we are estimating 2021 to be roughly 202.10. This is an increase of more than 28% from previous annual estimates.
Chart: This chart that shows how extreme the growth was. It also projects an estimated continued expansion to 219.77 in 2022.
There are undoubtedly concerns that could bring volatility back into the market and cause some jarring moments or even market corrections. However, if these insights are even close to being correct, we are likely to see a positive environment overall in 2022 and corresponds to a low risk of economic recession.
It would be irresponsible to make projections that that too rosy. It is also irresponsible to predict something that is overly pessimistic. 2022 will have its own trials and tribulations. We may not know what they are going to be exactly. It could be many things individually or even in concert that brings market volatility. However, the worst investor environments have come during times of economic recession and given the corporate growth, and despite all the struggles with COVID and supply chain issues, the probability of recession is very low.
We will certainly have twists and turns as we go into and through 2022. The greatest comfort is that we will remain vigilant and data dependent. We will navigate the adventure of the new year with you and for that we are extremely grateful. We cannot overemphasize the gratitude that we hold in our hearts for each one of you. We want to wish you the very best in the remainder of the year and the happiest of the season and of the new year!
Chart Sources: Ned Davis Research
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