Reflections on a Boom Year

We correctly anticipated a boom, but we didn’t attain the 10% real US GDP growth we’d talked about, thanks to the arrival of the Delta variant in Q3. We said no matter what the virus did, there would be no more lockdowns and the economy would continue to re-open. Our call for a 30% total return for the S&P 500 was spot-on. We were wrong that value would outperform growth – at least in large-cap, but in mid- and small-cap value strongly outperformed. We were correct that the 10-year yield would back up, but were wrong in March, at the top, when we expected it would rise further. We were right that there would be few policy wins for Biden, and no tax-hikes. We were right that inflation would emerge, and so far markets agree with our call that it will be transitory. We thought the Fed would be more dovish, but as policy has changed, we have been correct that it would have no market impact. We were correct that oil prices would rise, but that there would be no “super-cycle.”