Broker Check

2021 Q4 Letter to Clients

January 11, 2022

January 11, 2022

The new year is the perfect break in the calendar that allows us to take off the old and put on the new. It's like turning the page. It's a new chapter. It's a new book! You can't change the past, but you can change the future.

We can make a change by setting new goals, which we call New Year's resolutions. 

Considering financial resolutions, you might include:

  • Getting debt under control.
  • Saving more for retirement.
  • Getting a head start on taxes.
  • Reviewing health and life insurance options.

It's an old idea.

Did you know that there is evidence that the Babylonians made the first resolutions about 4,000 years ago? Julius Caesar reintroduced the practice when he established January 1 as the start of the new year in 46 B.C.E.

A banner year and a new year

The year 2021 was a banner year for investors. The broad-based S&P 500 Index, made up of 500 larger U.S. companies, finished the year up 26.9%. According to S&P Dow Jones Indices, if we included reinvested dividends, the index advanced 28.7%.


Much better-than-expected corporate profits (Refinitiv), powered by an expanding economy, plus a super-easy monetary policy compliments of the Federal Reserve, deserve much of the credit.

Low-interest rates, low bond yields, and rising profits easily offset worries about the lingering pandemic and much higher-than-expected inflation.

But we are now looking ahead into 2022. What might the new year bring? After last year's substantial advance, what might be in store for this year?

Since 1950, there have been 26 years in which the total annual return of the S&P 500 Index exceeded 20%, according to data provided by the N.Y.U. Stern School of Business. In the following year, the S&P 500 Index advanced 20 times, or 77% of the time, in line with the long-term average.

The average up year was 18.1%, while the average down year was 6.4%.

It's an interesting exercise, but let's always remember that past performance is no guarantee of future performance. Each year will have its distinctions.

We could add one more wrinkle. According to Dow Jones Indices, the index's total return has doubled over the last three years.

What dictates the market's direction will likely be the economic fundamentals and whatever impacts those fundamentals.

For example, what might the Federal Reserve do with interest rates? At the beginning of 2021, the Fed expected no rate hikes in 2022. However, it failed to anticipate last year's surge in inflation.

As the year ended, the Fed's new projections, which it released after its December meeting, reflected a forecast of three quarter-percentage-point rate hikes this year.

Are those potential rate hikes already being discounted by investors? If inflation fails to ease--or worse, accelerates--could the Fed take a more aggressive posture?

Let's take this point one step further. Longer-term bond yields have remained very low in the face of a less dovish Fed, high inflation, and robust economic growth. 

Will we get a reset in 2022? Or have there been fundamental changes in the bond market, holding yields low? Or do bond investors believe inflation and economic growth will slow?

Corporate profits are also a key driver of stock prices. Consider this: If you were to purchase or sell a small business, wouldn't recent and projected profitability play a significant role in the sales price? It absolutely would. The same principle holds for publicly traded companies.

How will the pandemic play out? We've seen Delta, and we're now seeing a surge in cases tied to Omicron. The economic impact of Delta was limited, and thus far, investors have side-stepped financial worries about Omicron. But what does 2022 hold?

We've posed several important questions that don't offer easy answers. We may see a pullback in 2022, and we recognize that downturns are a part of investing.

Inflation outlook:  

The main surprise of 2021 has been the surge in inflation as economies reopened. Some price pressures were expected as uneven reopening's from lockdowns disrupted supply chains and as firms hoarded supplies in a move from just-in-time to just-in-case inventory management. The rise in energy prices and the impact of the semiconductor-chip shortage on motor vehicle prices has played a significant role in pushing up inflation measures.

These issues are only slowly being resolved, and inflation may not peak before the end of Q1 2022. Headline inflation could exceed 7% in the United States. Inflationary pressures should subside over the remainder of 2022 as the improving supply side of the global economy catches up with moderating demand. The main uncertainty is around wages and labor supply. Workers have been slow to rejoin the labor force due to a combination of generous lockdown payments, inadequate childcare and school closures that have affected working parents, and early retirement among those over 50. Lower migration has also created labor shortfalls. We expect most of these workers will eventually return, which would help moderate wage growth. Labor-market tightness, if it persists, could keep upward pressure on wages and inflation and push core inflation closer to 3% than 2% long-term.

Based on your goals, circumstances, and risk tolerance, we craft portfolios that help manage risk, but we can't eliminate risk. 

If one trades the fear of a sell-off for a savings account, one won't participate in the long-term upside that stocks have historically offered. Conversely, take on too much risk when the market has been strong, and you may experience sleepless nights in a swift downturn.

If life events have forced you to rethink your goals, let's talk. Financial plans are not set in stone.

Yet, adherence to one's financial plan and a long-term focus has historically been the straightest path to reaching one's financial goals. We may see volatility next year. But predictions are educated guesses. As we've seen in the past, sell-offs, when they occur, are followed by rebounds. Keep this in mind as we navigate the New Year together.

As this exhausting pandemic continues to weigh on us, we can consider Beethoven's gift to humankind, His 9th Symphony, and the Ode to Joy composed during some very dark days In Vienna. While suffering from continued poor health and nearly deaf, Beethoven chose to give us an anthem to freedom and peace. Despite all his maladies and the situation in Vienna, he made us realize that there is potential for great joy in the darkest of times. The pandemic caused us to postpone the anniversary of his birth 250 years ago in 2020.


We trust you've found this review to be educational and helpful. If you have any questions or would like to discuss any matters, please feel free to give us a call.

As always, we are honored and humbled that you have given us the opportunity to serve as your financial advisor.

Gratefully yours,

The Silicon Valley Wealth Advisors Team

Tracy Lasecke, CFP®            Chris Duke, CFP®                 Scott Ponder, MBA, CFP®

Scott Yang, CPA, CFP®          Monique Ruiz                         Lisa Ozaki

Charles Tran


Charitable Giving

Throughout the 2021 year, we raised money for charity. Together we raised over $35,000 for charities, our highest amount to date, which we are blessed to say grows every year.

This year many of you took advantage of Qualified Charitable Distributions (QCD) from retirement accounts, allowing a tax-free distribution to qualified charities. We think the QCD is one of the most innovative tax moves, creating an actual win-win situation. (Note: the QCD is only applicable when you are of age to take an R.M.D.) Please reach out to us for more information on any of these and other techniques.


Tax Information for 2021 - Timing of available Tax Documentation 

Custodians are currently preparing your 1099 tax forms for your taxable accounts. Occasionally, tax information from investment companies to the custodians is late, causing the 1099s to be available later than planned. 

In general, Charles Schwab, TD Ameritrade, and Fidelity expect to have your 1099s available to you by mid-February. If you receive them by mail, they will be sent and may take a little longer. You can start checking your account online if you have online access, as that will be the fastest way to obtain your 1099. A reminder, 1099 revisions can come as late as mid-March. You can check on-line to see if you received one.


SVWA Happenings:  

Maintaining a spirit of ongoing innovation to meet our clients' changing needs has always been an essential part of SVWA's ethos – and this year was no different. Our organization continued to evolve while keeping you, our clients, as our focus. We are excited about 2022 as we look to expand our client offerings, adding talent and infrastructure to expand our service capabilities.


Personal Notes @ SVWA

Tracy and Roberta got to "sneak" off to Hawaii for two weeks late October. What a great break! We are constantly amazed at how many projects we must address around the house. Some are products of our imagination while others are unexpected maintenance, partly a function of being somewhat covid homebound.

Scott and Erin enjoyed a wonderful holiday season, cooking lots of great food and catching up with family. Our niece & nephew came home from their first semester at college, so it was fun talking about their experience so far. They are both doing well and enjoying it very much.

Chris was blessed to visit with his family over the holidays.

Scott played tennis but was happy to see the rain arrive to clear up the air and fill our rivers. The family was delighted to have the winter break to relax and reflect on an interesting year.

Charles finished his first out of 8 courses needed to complete the coursework required by the C.F.P. Board. He is starting his next class in January, continuing his journey to achieving the C.F.P. certification. He spent time in Big Sur, Monterey, Christmas in the Park, and celebrated Christmas/New Year's at home during the holidays.

Lisa had a hectic weekend in December when she had to move all her belongings to a new apartment within three days. Afterward, she made time for herself and started a new book, Lady Joker, by Kaoru Takamura.

Mo and family are enjoying time at home with our July 2021 addition, Muchacho. Muchacho turned 1 in December 2021, and he is a Pit Bull terrier we rescued from the San Jose animal shelter. My son said he was a deal he couldn't pass up, $10 for dogs over 50 pounds. Thankfully, he is a sweet baby boy.