2021 was a year characterized by hope. After the major economic and societal shocks caused by the pandemic (800K+ diseased) and the policy response (lockdowns, mandates, subsidies, payments, moratoriums, etc), average Americans were looking forward to open air activities, dining, domestic travel, online shopping, home improvements, and day-trading. In short, average Americans were looking to spend some lockdown induced savings as well as economic impact payments from the federal and state governments.

As it is now a tradition, for this final post of 2021, we are going to discuss 3 charts that, from our view, defined the market narrative for 2021 and that will set the tone for 2022. We hope you enjoy.

1. After a peak of 14.7% in April 2000 due to government mandated lockdowns, the unemployment rate saw a dramatic improvement and dropped to 4.2% in November 2021 or 6.9M unemployed. Even with this incredible recuperation, employment remains above pre-pandemic February 2020 levels of 3.5% or 5.7M unemployed. Furthermore, the size of the workforce (employed or seeking employment) has dropped by 3.9M less workers, hinting to further pain for labor intensive industries like hospitality, travel, restaurants, transportation, and manufacturing.

2. A shrinking labor force, coupled with raising wages, logistical and supply chain bottlenecks, as well as high energy and commodity prices, make up a powerful inflationary cocktail, as reflected by the year-over-year CPI, currently exceeding 6%, the highest print since July 1982 (close to 30 years). The question is whether or not this inflationary trend will stay with us until the next cycle, with the answer largely driven by monetary and fiscal policies. Expectations going forward are anchored around the success of fiscal initiatives proposed by the federal government, the dysfunctional political narrative around economic sensitive issues, and continued monetary support, this time centered around the messaging on timing of tapering, and rate hiking.

3. The rise of a new class of retail traders has brought about incredible volatility to domestic public equity markets. Retail traders have been traditionally characterized as a sleepy bunch of mostly retired folks personally investing excess savings via online brokers like Charles Schwab, Fidelity and TD Ameritrade. Lockdowns, government payments, the lack of a consistent professional sports season, as well as a new class of free mobile-focused online brokerages (Robin Hood, Webull, SoFi), has empowered a new class of younger community and cost-driven, technologically focused retail traders to express a variety of investment views on the stock and options markets with spectacular results. GameStop Corporation and AMC Entertainment Holdings saw their stocks jump by more than 2,000% on their peaks (3,000+ for AMC) bringing about incredible levels of volatility across value stocks, fueling a raging debate among market participants, regulators, and policy makers.

3 Charts That Defined 2021