2021 Review | 2022 Outlook

Office News

2022 marks our 10-year anniversary since launching Rose Capital Advisors!

We are planning to have celebrations later this year in Miami and New York. Details to follow!

We experienced several high-profile client acquisitions and continued AUM growth


A Review of our 2021 Investment Outlook

We conducted an informal straw poll of Investment Committee and Investments Team members and asked them for their highest conviction “calls” for 2021.

2021 TOP 10 THEMES

Demand for municipal debt will remain highly elevated with high tax-bracket investors looking for after-tax yield

Municipal flows finally eclipsed 2019’s record and came in at $106+ billion for the calendar year 2021.

International and Emerging Markets performing strongly on the foundations of a weaker dollar, attractive valuations, and higher growth

International Developed (+8.16%) and International Emerging markets (-4.59%) lagged the S&P 500 (+26.89%) and Dow Jones (+21.35%).

Relations with other countries improve and forge to a more united global society

Efforts to improve US relations with other global nations and organizations was made. Marked emphasis on improving US diplomacy and international cooperation

Active management will become increasingly important in the coming years due to dislocations in the market

Active management struggled to out-perform passive on the headwinds of market timing, fees/trading costs, and increased professional competition.

Immense fiscal stimulus and post-COVID pent-up demand will lead to a continued steepening of the yield curve and pick-up of inflationary pressures

US inflation rose +7% y-o-y in 2021. Other countries such as Brazil (+10.06%) and Turkey (+36.08%) were even higher. The yield curved steepened sharply, but with no interest rate hikes.

Increase of discussion around higher taxes and regulations with new administration

Higher taxes for both individuals and corporations included in proposed “Build Back Better” bill. Heightened emphasis on regulations on certain sectors of the economy as well.

Volatility remains and stays elevated for the foreseeable future

Although the average VIX level was only slightly elevated compared to historical averages, there were frequent but short-lived spikes. Realized volatility was lower than implied by the futures market.

Alternative avenues for yield will become more popular (preferred securities, dividend-stocks, private & securitized credit)

With inflationary pressures and rates still at record lows, alternative income sources such as REITs/real estate, private credit, and dividend stocks saw increased demand and inflows.

M&A, PE, SPAC and startup activity to remain highly elevated; enormous amounts of cash on the sidelines privately and publicly

$5.1 trillion worth of M&A transactions in 2021, up from $3.8 trillion in 2020 and the highest level since 2015. Global PE activity included $2.1 trillion, which more than doubled 2020s $1 trillion. Finally, SPAC IPOs reached record highs in 2021, increasing to 613 from 248 in 2020.

Global GDP rebounds and begins a path toward continued growth

On the rebound from 2020, Global GDPs grew at impressive figures. US GDP grew at levels not seen since the 1970s and projections for 2022 remain strong.

2022 Investment Outlook

We conducted an informal straw poll of Investment Committee and Investments Team members, and asked them for their highest conviction“ calls” for 2022.

Inflation to remain elevated, but begins to normalize in the face of improving supply chain conditions, fed tapering, and interest rate hikes.

Long duration assets (equities and fixed income) to struggle as a result of rising rates, but a positive for fixed income in the long term as reinvestment rates rise.

Fundamentals come back into focus, with value, dividend, and quality equities more favorable than speculative growth.

Expect lower broad market index equity returns in the next decade than in the last, returning to a more normalized historical average return profile.

Valuations outside of the US look attractive, but multiple discounting factors should be considered (geopolitical risk, poorer earnings quality, currency risk).

Global GDP growth to remain strong, but less than the rebound off the COVID lows of 2020.

Despite rising input costs and wage growth, corporate earnings to remain strong both in the US and abroad.

A strong consumer balance sheet and tight labor market result in continued strong personal consumption despite poor sentiment.

M&A, PE, and IPO activity to remain elevated, but lower than the record numbers that 2021 produced.

Geopolitical uncertainty increases throughout the world on multiple fronts.

The overall outlook continues to suggest that investors and advisors focus on diversification, patience, and an appropriate management of expectations.
We believe our client portfolios are appropriately allocated to take advantage of these themes, while remaining prudently diversified in the event that market conditions take an unexpected path.

Additional Investment Outlooks:

Rose Capital Advisors 2022 Outlook

The Bespoke Report 2022

J.P.Morgan: Eye on the Market Outlook 2022

WisdomTree: Economic & Market Outlook 2022

Byron Wein Top 10 Surprises for 2022

Investment Advisory Services provided through Rose Capital Advisors, LLC. Securities offered through Saxony Securities, Inc. Member FINRA/SIPC

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