Market Data as of Week Ending: 12/31/2021 unless noted otherwise
U.S. stock prices generally rose as the S&P 500 Index ended the year at a record high. Investors will start the year with a skeptical view to see if the recent surge in coronavirus cases detracted from growth. Analysts are expecting fourth quarter earnings to grow more than 20% for the S&P 500. Value stocks ended the year with solid gains outpacing their growth counterparts for the week and the month of December, but lagged for both the quarter and the year. Smaller companies generally lagged for both the week and the month, whereas mid-sized companies outperformed. Most of the major economic sectors delivered gains for the week, but outperformance was concentrated in traditionally defensive sectors such as real estate, utilities, and consumer staples. In a reversal from last week, consumer discretionary, information technology, and communication services sectors lagged. Both developed foreign and emerging market stocks ended the week with gains and outperformed U.S. stocks.
U.S. Treasury yields were mostly flat and ended the year approximately 0.6% higher for both the short and intermediate parts of the curve as the 10-year finished at 1.51%. Investors expect the Fed to begin raising short-term interest rates in 2022, which has caused the 2-year treasury note to increase by nearly 0.5% over the past three months. Long duration corporate bonds were the best performing segment of the bond market and short duration government bonds lagged. Investment grade corporate bond yields and high yield corporate bonds finished the year at 2.4% and 4.9%, respectively.
It was a light week for economic data with housing data and some early retail sales signals headlining the week. Housing data reported mixed results as pending home sales declined more than 2% and home prices increased 0.9%. According to Mastercard, holiday retail sales, excluding automotive, increased 8.5% year-over-year this holiday season and more than 10% compared to the prior year in 2019. Initial jobless claims fell back below 200,000 and remains near a more than fifty year low. In Europe, coronavirus infections surged and several countries such as Portugal and France have announced mandatory work from home measures. In Asia, Japan reported a record high of more than 7% growth in industrial production with strong contributions across a wide range of industries.