Acumen Portfolio Performance Q4 2021
Commentary on Portfolio Performance – Quarter 4 2021
Effective diversification and judicious asset allocation delivered consistently positive returns over EVERY quarter in 2021 across each of our Low, Low to Medium and Medium Risk Strategies. This was not achieved without challenge.
After a relatively normal summer, the coronavirus once again had a major effect on markets due to the Delta variant, closely followed by the Omicron variant. Thankfully, booster shots seem effective at preventing infection and the virus seems to be milder in effect than previous variants.
In the U.S. inflation rose to 6.8% year on year in November, a level not seen since the 1980s. This has prompted tapering of bond buying by governments to be sped up and the US could see 3 interest rate increases by the end of 2022. Eurozone inflation was posted at 5.0% year on year to December. The European Central Bank president Christine Lagarde has committed to phasing out the bond buying programme but ruled out Eurozone interest rate rises in 2022.
After a slowdown in the autumn, growth reaccelerated at the end of 2021.While global recovery has been delayed, it has not been derailed, and the global economy is registering solid momentum as we look forward into 2022.
Markets in Quarter 4 2021
Equities
Stocks regained momentum throughout October with many equity indices making new highs during the course of the month. The Evergrande bankruptcy possibility shook financial services, real estate and related sectors but it became clear we were in for a strong Q3 earnings season, with more than 80% of companies beating earnings expectations, which helped to drive the S&P 500 to a new peak.
The UN Climate Change Conference (COP26) passed without great market impact in November. Approval in the U.S. of a one trillion dollar infrastructure bill helped drive equity markets to new highs. Global developed markets also hit new highs while emerging markets hit a 4 month peak. In Ireland, the broad-based strength of the economy was reflected in surging tax receipts and growth forecasts for the economy were revised sharply upwards. The traditional “Santa Claus” rally was delayed by large market falls at the start of December when the Omicron variant was still very much an unknown. Despite this, markets did have a late bounce and the S&P index recorded its third best calendar year in the last 15 years.
Bonds
The European Central Bank (ECB) confirmed that the pandemic emergency purchase programme (PEPP) would end in March 2022, reducing purchases to roughly €40 billion per month via the asset purchase programme in 2Q 2022, €30 billion per month in 3Q 2022 and then €20 billion per month until shortly before the first rate rise. This and persistent inflation pressure continued to be a headwind for fixed income but credit was more resilient, supported by strong corporate balance sheets and earnings and the prospect of rating upgrades.
Property
Commercial rent collections returned to almost pre-pandemic levels and there was plenty of activity across sectors in the property market. Valuations remained stable with continued strong interest from overseas and demand in the logistics sector.
Alternatives
Appreciation of the US dollar relative to the Euro aided alternatives while gold provided stability. Energy commodities remain elevated as an unstable supply of Russian gas, falling investments in thermal energy and maintenance work on nuclear power plants led to a sharp rise in gas and electricity prices in Europe.
