Happy New Year. We hope you and your family had a safe and restorative Christmas break.

Welcome to our latest investment commentary covering the final quarter of 2021 and the year as a whole. This update provides some more in-depth commentary on the markets and our views moving forward.


2021 was not quite the eventful year 2020 was, but it was nonetheless marked by a number of significant market events. To summarise a few of these:

  • Inflation as measured by CPI rose to 6.8% in the US and 5.1% in the UK year on year.
  • A wide array of commodities increased by eye watering amounts, most notably European Natural Gas which rose 350%.
  • The Bank of England raised interest rates for the first time in three years to 0.25%.
  • Tesla became one of the top 5 most valuable companies in the US, exceeding a market cap of $1trn and in turn making Elon Musk the richest person in the world.
  • A group of retail investors caused the share price of Gamestop to rise by many multiples, causing losses in excess of $20bn for the hedge fund industry.
  • The Alpha, Delta, and more recently Omicron variants of Covid-19 led to renewed Covid waves across the world.

On reflection, 2021 was dominated by macroeconomic factors, in particular inflation. As with 2020, this led to large dispersions in returns and a great deal of volatility across several sectors.

The push and pull between the growth and more economically sensitive sectors was a key feature, in continuation of what we saw in the final stages of 2020, as many countries attempted to normalise everyday life and inflation crept higher.

Sustainable investing, commonly abbreviated as ESG, continued to gain traction particularly due to the COP26 summit. There has been a notable shift in focus towards the ‘E’ in ESG, with the 2015 Paris Agreement and talk of a net zero future gathering momentum.

We would now like to review the previous quarter before moving on to our outlook.

Q4 2021 REVIEW

Market Performance

Seasonally, the fourth quarter is usually positive for markets although again, there was a dispersion in outcomes, with the Developed markets performing well but Emerging Markets negatively. Looking under the bonnet of the Developed markets and at the Tech sector in particular, large cap Tech companies such as Microsoft and Apple did well, but other Tech sectors such as cloud computing struggled. Since the large cap Tech companies make up a large proportion of the US and Global indices, it made it difficult for active managers to outperform.


We have in previous commentaries mentioned the difficulties ahead for the various economies in the Northern Hemisphere, given we are in the Winter season. The Omicron strain of COVID-19 is creating significant problems in the UK and parts of Europe, leading to renewed restrictions as viral cases spiral. Despite the significant number of mutations within the Omicron strain, it appears symptoms are milder than with previous strains, potentially leading to any economic damage being contained.


Inflation data continued to dominate the news flow, with year on year data hitting levels not seen for many years. There were several reasons for this, with a sharp rise in Natural Gas prices contributing. We did not see the same response in the markets, as we did earlier in the year, suggesting much of the inflation story has been priced in for now.

Central Banks

It is no surprise that the Central Banks, including the Bank of England (BoE), have changed their tone and are now concerned with the inflation backdrop. The BoE are expecting UK inflation to rise to 6% in 2022, leading them to raise interest rates for the first time in three years with the prospect of more to come. The US Federal Reserve has been very active in reducing their quantitative easing programme and they too have hinted at raising interest rates this year.


The end of the pandemic?

Whilst the Omicron variant spreads rapidly across the world, there are some suggestions that the virus is mutating to the point that it is no longer a major health concern. Perhaps this is evident in the milder symptoms due to the new strain. It is of course difficult to predict such outcomes, but the evidence is pointing towards a more promising year ahead.

Central Banks

Whilst inflation dominated the macroeconomic environment in 2021, we believe it will be the Central Banks that will be the dominant force in 2022 with the US Federal Reserve leading the way. Whilst they have been extremely accommodative since the emergence of the pandemic, they are now changing tact, and are taking a more hawkish approach moving forwards. We are very likely to see higher interest rates in most major developed economies and a decrease in liquidity.

This could create some challenges for the markets and so we have been reducing the level of risk in the portfolios.


We believe the backdrop is likely to be more challenging in the short term, with the potential for higher volatility as the Central Banks become more hawkish.

We will shortly be making changes to our portfolios. For our advisory clients, please can you respond to the recent fund switch notification if you have not done so already.


We are delighted to announce our next investment webinar will be hosted on 17th January at 13.00. We will be discussing our outlook for 2022 and some of the ideas we have for the portfolios. Please click HERE to register for this.

We hope you find this review informative and look forward to hearing from you if you have any questions.


This publication and the webinar recording have been prepared for information purposes only by Carrington Investment Consultants Ltd t/a Carrington Wealth Management and do not constitute financial advice. The value of investments, and any income generated from them, will be affected by interest rates, exchange rates, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which it invests. Investors should be aware that the value of units may well fall as well as rise, is not guaranteed and that past performance is not a guide to future performance. Different funds carry different levels of risk and investors may not get back the full amount invested.