U.S Stocks traded lower for the last session of 2021 after some late selling but ended the year with strong gains. The S&P 500 Index fell by 0.3% and ended December by nearly 4.5% higher, the third-best month of the year and best December since 2010.

For the year, the S&P 500 Index was up about 27%. The S&P 500 Index set 70 all-time highs during the year, which is the most in a single year since the 77 that was experienced in 1954.

In the bond market, the 10-year Treasury yield ended a shortened session flat at 1.51%, just below the 50-day moving average of 1.52%.

“If there is one thing that we have learned this year, it is that the U.S. economy has proven to be resilient in the face of pandemic-related challenges,” said Brett Ryan, senior U.S. economist at Deutsche Bank.

Here are the closing levels on Friday: –

	Last	Change	% Change	1 Year Return
Dow Jones	36,338.30	-59.78	-0.16%	+20.95
S&P 500	4766.18	-12.55	-0.26%	+28.68
Nasdaq Comp	15,644.97	-96.59	-0.61%	+22.21
U.S. 10Y	1.51%
VIX	17.22	-0.11	-0.63%

In spite of the late selloff, 2021 had its Santa Clause rally and was Merry and Bright.

By all standards a very good year indeed.

The markets will probably remain volatile as we start 2022 with bulls defying gravity and bears hoping for retracements or pullbacks.

The main focus for this year is going to be inflation. We started 2021 expecting around 2% inflation but ended closer to 7%.

This does not look like it’s going away anytime soon. Central banks are going to have their hands full trying to get ahead of inflation before it runs away. Therefore, their actions or anticipated actions could have an impact on markets.

Meanwhile, Covid and its mutations may still play a role if we get new strains that are more deadly.

Of course, we are hoping that the mutations that follow will diminish in strength and end up like the flu virus but that could be wishful thinking.

The recent flight cancelations due to infected staff is an indication that the virus can still be disruptive, so it would be unwise to write it off completely.

One wildcard could be Russia. If they continue to threaten the invasion of Ukraine, it may drag Europe and the U.S. into action, which is never good for markets.

The bar is set very high for January, in fact for 2022. After a monster year of nearly 30% gains, questions will be asked if we can achieve the same this year.

Whatever the new year brings, I want to wish one and all a very healthy and prosperous 2022!

Source: CBOE, Bloomberg  

This commentary is written by James Gomes 
James has been in the finance industry for over 30 years and most recently worked for a large U.S. bank for more than 20 years. 

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