U.S. Versus International
The S&P 500, an index of large U.S. companies, posted a total return of 10.7% for the Fourth Quarter of 2021. S&P 500 performance was driven by strength in select stocks with large weights in the index. U.S. stocks significantly outperformed international again for the quarter as measured by the iShares MSCI EAFE ETF, a representation of international stocks outside the U.S. EAFE total return for the Fourth Quarter of 2021 was 2.8%.
U.S. stocks outperformed International by a significant margin in 2021. The S&P 500 Index achieved total return of 27.7% for the full year. MSCI EAFE International Index had 2021 total return of 12.2%. International stocks have struggled to regain growth following the COVID slowdown. International stocks remain significantly undervalued versus U.S. stock valuations. However, without signs of stable growth it will be difficult for international stocks to gain momentum.
A few of the top performing international countries for the fourth quarter included United Arab Emirates, Saudi Arabia and Canada—all countries that benefit from strengthening energy markets. Turkey and Chili were a couple of the weakest performing areas. Both Turkey and Chili are susceptible to very high inflation and weak currencies. Inflation skyrocketed above 20% in Turkey.
U.S. Sectors
Top performing U.S. S&P 500 sectors as reported by Koyfin for the fourth quarter of 2021 by total return include Real Estate (17.6%), Technology (16.7%) and Materials (15.1%). Laggards for the fourth quarter include Communications (-2.8%), Financials (4.6%) and Energy (7.9%).
For the full year 2021 the top performing U.S. S&P 500 sectors included Energy (58.1%), Real Estate (44.7%) and Financials (38.5%). The weakest performing sectors included Utilities (16.6%), Communications (16.8%) and Consumer Staples (17.2%).
Value-oriented investments that benefit from a recovering economy made a comeback in 2021 while stocks in general staged one of their largest increases on an annual basis. Weaker stocks included slower growth companies that tend to do well when the economy slows. Years of stimulus efforts by the Federal Government have left substantial funds in the economy with limited investment opportunities. This continued flow of funds is helping prop up stock prices
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