Q4 2021 Quarterly Market Commentary

Stock Market Themes Carry into Fourth Quarter and Likely Persist into 2022

The fourth quarter was impacted by many of the investment themes we discussed during 2021. Consumer demand remained strong, inflation pressures intensified, a new COVID-19 variant emerged, the Federal Reserve moved closer toward raising interest rates, and the credit markets were volatile. Despite the uncertainties surrounding these topics, equities traded higher during the fourth quarter. This quarterly letter provides an update on these themes as we exit 2021 and look ahead to 2022.

Consumer Demand Remains Resilient

The U.S. consumer, which accounts for approximately 70% of annual U.S. economic activity, continues to be a bright spot. Consumer demand remains particularly strong across goods categories, such as furniture, appliances, and electronics, while the pandemic is causing individuals to spend less on services. The robust consumer demand is evident in global shipping data as a wave of imports arrived in the United States. Data show monthly container traffic plunged during the early stages of the pandemic as the global economy locked down. However, container traffic rebounded quickly and remained above-average during each of the past 17 months. Soaring container volume is a contributing factor to current supply chain issues. Port operations simply cannot keep up with the volume surge, which is causing containers to pile up in shipping ports.

As ports and supply chains gradually move toward de-bottlenecking, attention is shifting toward future demand. There are questions about how much demand the pandemic pulled forward and uncertainty about how long consumer demand can remain strong. One would think consumers only need so many televisions, appliances, bikes, furniture, etc.

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Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC. Oxford Harriman & Company is a separate entity from WFAFN. CAR-0122-02262

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