More of the Same

Once again, we will touch lightly on the recent picture of the overall market so we can instead turn our focus to the much more important topic of my 2022 stock market outlook," states Steve Reitmeister, editor of Reitmeister Total Return.

The stock market moves fast. A bit too fast for some who focus on the negative headlines instead of peeling back to the big picture of what is happening. And what is happening is that Omicron is spreading like wildfire. Gladly symptoms are mild, and the initial fears of shutdowns and economic damage have been greatly minimized.

That initial concern about Omicron did correctly create a pause for investors. The S&P 500 (SPX) peeled back about 5%. However, most risk-on, small-cap and growth-oriented selections saw more painful 10-20% haircuts.

Since then the market has determined that there is currently little reason to believe that Omicron will create any more economic damage than Delta. And since the economy and bull market kept on their merry way in 2021 in the face of Delta...then investors hit the buy button once again with stocks shooting up to the previous highs...then onto new highs before the year was out.

This same script was repeated to kick off the year as stocks sprinted higher on the first trading session. Even more important, small-caps doubled the returns of large-caps. This is an important theme that should be repeated in the year ahead.

Meaning that small-caps were grave underperformers in 2021 (15% gain vs. 30% gain for the large-caps in the S&P 500). In a healthy bull market, small-caps should be leading the way. Thus, good to see investors flock to them to start the year...and likely a trend that will continue in 2022 (which is why I recommend overweighing small-caps in the year ahead).

Portfolio Update

As we close the books on 2021, we find that the RTR portfolio provided a market beating +31.61% return.

Note that return doesn’t include dividends as I don’t track that specifically. But certainly, we had our share of healthy dividend payers that would likely add another 1 to 1.5% to the party.

That may seem like a modest topping of the S&P at 29.88%. However, let’s remember that is dominated by the FAANG stocks and Tesla. As we look further down the food chain the gains were not as prevalent.

For example, the small-caps of the Russell 2000 (RUT) were up only 14.99%.

However, the broadest based measure of the market is the Wilshire 5000 (W5000) (as in tracking the 5,000 most widely traded stocks). This is the most accurate benchmark to use against a service like RTR. There we see a +22.82% gain on the year. Right about the midpoint of the Russell and S&P.

Any way you slice it...we beat the market. And gladly out of the gate hot this year with a 2% lead in just two sessions (if only that were true every day of the year).

No, we didn’t do everything right. Plenty of mistakes to point to that we could have done better. You WILL make mistakes.

The key over time is to do more right than wrong. Where truly just being right 55%+ of the time is all that is needed to gain an advantage over Mr. Market.