4 Jan 2022

It’s Just The Facts: December 2021

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  1. FOR THE YEAR – The S&P 500 gained +28.7% (total return) during 2021, the 13th year in the last 25 years that the $42.4 trillion index has returned at least +15% (total return) for the calendar year.  The S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation.  It is a market value weighted index with each stock’s weight in the index proportionate to its market value (source: BTN Research).
  2. TIME IN THE MARKET – Since 1950 (i.e., 1950-2021), the S&P 500 index has been up 54% of 18,118 trading days, 61% of 864 months, 67% of 288 quarters and 74% of 72 years (source: BTN Research).
  3. MISSING THE BEST – The total return for the S&P 500 over the last 30 years (1992-2021) was a gain of +10.6% per year (total return).  If you missed the 30 best percentage gain days over the last 30 years (i.e., 30 days in total, not 30 days per year), the +10.6% annual gain falls to a +4.4% annual gain (source: BTN Research).
  4. JOBLESS – The lowest (3.5%) and the highest (14.7%) unemployment rates in the United States since 1970 occurred 2 months apart in 2020.  Our jobless rate in November 2021 was 4.2% (source: Department of Labor).
  5. NEW HOMES – The median sales price ($416,900) and the average sales price ($481,700) of new homes sold in the United States both reached all-time record highs in November 2021, both on a nominal basis and on an inflation adjusted basis.  A decade earlier (November 2011), the median sales price was $214,100 and the average sales price was $242,900 (source: Census Bureau).
  6. TEN-YEAR TREASURY NOTE – The yield on the 10-year US Treasury note ended calendar year 2021 at 1.496%, up 0.583 percentage points from its 12/31/2020 close of 0.913%.  The 10-year Treasury note yield was 0.501% on Monday 3/09/2020, its lowest closing yield ever.  10-year notes have been traded in the USA since 1790, i.e., 231 years of trading (source: Treasury Department).
  7. HOUSING – The average interest rate nationwide on a 30-year fixed rate mortgage was 3.11% at the end of 2021.  The all-time record low national average is 2.65%, set on Thursday 1/07/2021 (source: Freddie Mac).
  8. STOCKS AND HIGH INFLATION – In the last 70 years (1951-2020), inflation as measured by the “Consumer Price Index” (CPI) was been at least +5% in 12 different years, most recently in 1990.  The S&P 500 has been equally split over the 12 high-inflation years, advancing in 6 years and falling in 6 years (on a total return basis).  The average return for the S&P 500 over all 12 years is a gain of just +3.2% (total return) (source: BTN Research).
  9. THEY HAD ENOUGH – 3.2 million Americans retired in 2020, a +56% increase over the average 2.05 million Americans who retired over the previous 8 years, i.e., 2012-2019 (source: Pew Research Center).
  10. WHEN WILL THEY SPEND IT? – An estimated $3.3 trillion of additional cash has been accumulated in bank accounts by American households since the beginning of the pandemic, i.e., cash that would have previously been spent (and not saved) if the pandemic had not occurred (source: Longview Economics).
  11. BONE DRY – California’s “Water Year 2021” (the 12 months from 10/01/20 to 9/30/21) was the 2nd driest year for statewide precipitation in its history.  “Water Year 1924,” or 97 years earlier, was the driest year in California’s history (source: California Department of Water Resources).
  12. UP AND DOWN – The nation’s personal savings rate, which soared during the early months of the pandemic, has now fallen back to its pre-pandemic levels.  The savings rate was 7.5% in November 2019, rose to 33.8% in April 2020, and now has come back to 7.5% in September 2021 (source: Bureau of Economic Analysis).
  13. TAXES – The top 3% of US taxpayers in tax year 2019 reported at least $291,384 of adjusted gross income (AGI) but paid 52.10% of all federal income tax.  The 97% of taxpayers who reported less than $291,384 of AGI paid the remaining 47.90% of federal income tax that was collected in tax year 2019 (source: IRS).
  14. IMPACTING MANY – 45% of American households surveyed in November 2021 indicate that rising domestic inflation has caused them “moderate” or “severe” hardship (source: Gallup).
  15. HOME LOANS – Government-backed mortgages, e.g., FHA or VA loans, make up 50% of all home mortgages.  The maximum government-backed mortgage loan in 2022 in a majority of the US will be $647,200.  In high cost areas of the country, the maximum loan will be $970,800 (source: Federal Housing Finance Agency).
  16. START SAVING NOW – A child born in 2021 that begins kindergarten in the fall of 2026 would attend college between the years of 2039 and 2043.  If that child attended an average public in-state 4-year college and if the annual price increases for public colleges that have occurred over the last 30 years (+4.9% per year) continued into the future, the aggregate 4-year cost of the child’s college education (including tuition, fees, room & board) would be $229,635 or $57,409 per year (source: College Board).
  17. WAS PRIVATE, NOW PUBLIC – The cost of tuition, fees, room and board at an average public 4-year college for the current 2021-2022 school year is $22,690.  The cost of tuition, fees, room and board at an average private 4-year college for the 2000-2001 school year, i.e., 21 years ago, was $22,240 (source: College Board)

Courtesy of Mortgage Market Guide 

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