That's a Wrap

Monthly Market Snapshot: December 2021

Highlights

Global equity markets finished the year 16.8% higher with U.S. stocks leading the way with a 26.9% gain. Emerging market equities were the notable laggard – closing the year 4.6% lower. The year presented several challenges including surging inflation, supply bottlenecks, rising interest rates, continued spread of Covid, and a pivoting U.S. central bank, but corporate profits surged with S&P 500 earnings-per-share rising by 47.3%. Following the jump in profits, U.S. stocks are now cheaper than one year ago with the S&P 500 price-to-earnings ratio falling from 29.7x earnings to 26.3x earnings.

The Omicron variant of the COVID-19 virus continues to cloud the outlook, but its economic impact is likely to be transitory. It will likely take a couple of months to discover the depth of its impact, but it is important to remember that we have learned to fight back through vaccines and social-distancing protocols and each new wave seems to lead to less market reaction. Equity market performance in the year ahead will more likely be driven by further normalization in economic activity and global central bank policy.

Citi’s Global Investment Committee (GIC) maintains a +6.0% overweight on Global Equities with half of the overweight invested in Global Healthcare and a -6.0% underweight on its Fixed Income and Cash allocation.