January 2022 Market Commentary

You will notice an additional signature below. As our company grows and we continue to plan for the future, Ken Bowen has been elected…

I will continue as Chairman of Toth Financial and remain involved in the oversight of our investments and goals. We are excited about this move as it provides for a disciplined succession plan that will serve our clients exceptionally well into the future. What does this mean for you… absolutely nothing as you can expect the same high level of investment advice and services that have become a hallmark of Toth Financial. Please know that I am always available should you ever have any questions.

2021 has ended and with it the S&P 500 closed with a price gain of 26.89% for the year. Reflecting on what has occurred through this past year while looking at where we are today helps us to remain optimistic about the future. Below is an excerpt from a recent article from Zacks Research:

“Estimates for 2022 earnings have moved higher all year. And yet no one seems to be happy with the economy. There are only problems, issues, and crises, with barely any stories covering record sales, rising wages, abundant jobs, and incredible demand. Some of the biggest U.S. retailers, including Target and Walmart, have reported being fully stocked for the holiday shopping season, but all we hear about are supposedly empty shelves.

I’m not saying the economy is humming nicely and there are no issues to speak of. But I do think there is a fairly wide – and seemingly growing – disconnect between people’s perception of the economy versus the actual fundamentals of the economy. Many investors and the media see the economy in bad shape and getting worse, which makes me even more bullish. The wall of worry is growing, and stocks love to climb it.”

Another reason we remain optimistic is due to the employment situation. In late November, jobless claims for new unemployment insurance fell to a 52-year low. Coupled with that, we are back to near all-time highs of job openings waiting to be filled. As of the end of October, there are just over 11 million job openings across the nation which is nearly twice that of the estimated 6.9 million people that are unemployed; demand for labor is probably as strong as it has ever been.

In addition to the employment situation, small businesses are flush with money. Almost 11.5 million small businesses were approved PPP loans totaling near $800 billion during 2020 and 2021. These recipients represent one third of the estimated 30 million small businesses in the US which accounts for approximately 65% percent of all new jobs created annually.

Another bright spot, in a not so talked about part of the economy, are the demographics. The median age of the Millennial generation is 36 years old. This puts the majority of this generation as just now moving into their prime earning years, starting families, buying homes, and focusing on 401k investing. Strictly by quantity, the Millennial generation is 26% larger than Generation X that came before them. This single factor alone is likely to keep demand elevated and corporate profits growing into the future.

The economy will never be perfect, and certainly neither will the equity markets. However, we want to remind investors that equity markets can be volatile and unclear, but these bumps are normal. It is historically quite common to have both inflationary periods during the immediate phase after a recession and a rise in volatility as the Fed winds down accommodative policy. These both should be viewed as a ‘toll’ one must pay for the possibility of achieving returns greater than that of bonds and/or outpacing inflation.

The bottom line is that demand is strong, job openings are near all-time highs, and companies are reporting record profits. Couple these current economic characteristics with the demographics of the United States and we remain optimistic about what is to come.

Thomas A. Toth, Senior
President & CEO