RESEARCH // January 27, 2022
Quarterly Commentary Letter – Q4 2021: When the Good Times Still Rolled

Markets ended the second pandemic year on a high note. Buoyed by a bounce back in US GDP growth in Q4 and continued strong earnings, equities notched up new record highs. Unemployment dropped rapidly, reaching below 4 percent in the US. Travel picked up over the holiday-intensive quarter, even as news emerged from South Africa of a new Covid variant. Many Americans hoped that the reopening of theaters, some offices, and businesses would allow for a more normal 2022.

They were wrong.

It did not take long for the mood to sour in the new year. Dangers to the 2022 outlook were already evident in Q4. Behind the good cheer, five broad themes emerged: 1) earlier and maybe more abrupt US monetary tightening; 2) rising inflation; 3) a shifting labor market; 4) a growth slowdown in China, with consequent monetary easing; and 5) the continued cloud of Covid-19. And overlaid on all of these themes is the impact on global sentiment of geopolitical tensions, notably Russia’s increasing threat to Ukraine.

Persistent high inflation in October and November finally triggered an unambiguous shift in tone from the world’s most important central bank late in the quarter. In mid-December, the Federal Reserve indicated an earlier and steeper tightening of monetary policy. The message seemed to sink in only in January, when Fed minutes from December showed central bankers thinking ahead to shrinking the Fed’s balance sheet, as well as raising interest rates. The news that consumer prices rose last year at a pace not seen since 1982 has only reinforced expectations of tightening. Inflation pressures are also evident across the Atlantic, with unexpectedly high December readings in both the UK and Europe. Markets are on edge to see what the Fed decides in its first policy meeting of 2022 on January 26. In the meantime, equity markets plunged into correction territory this year and forecasters, including the IMF, are marking down global growth.

Geopolitical tensions that have been front and center this month also began in Q4, as Russia massed troops on its borders with Ukraine and issued a list of demands to the US and NATO allies that challenge the post-Cold War order in Europe. Concerns about China’s turn towards more state control, less freedom for private enterprise, and less openness to the West continued in Q4, as did worries about the impact on growth in the world’s second largest economy of the widening crisis in its over-indebted property sector.

But perhaps the most important cloud hanging over 2022 from last year: a sudden resurgence of Covid infections with the extra-contagious Omicron variant sweeping across the world after it was identified in November. Daily infection rates in the US and elsewhere shot up to the highest levels since the pandemic began. Just as it has for the past two years, the new Coronavirus shifted expectations and upset plans for work, school, and life more generally.

While markets greeted the new year with a thumbs down, investors should not despair. The global economy is set to continue to grow, albeit at a slower pace than hoped, dented by both Omicron and tightening money. There is some hope that a new policy approach to what remains the biggest “known unknown”– Covid-19 – will emerge in 2022. In the US, there is growing acceptance that a gradual return to pre-pandemic normal may not be realistic. The next best option would be a considered plan – and timely actions – for living with the virus. Better protective masks and access to testing is now part of the US plan. Further medical advances that will help are already in the pipeline. Innovation remains a key strength for the US – and for investors.


Click here to read the full RockCreek Q4 2021 Commentary Letter



  1. Macro Review & Outlook
  2. Sustainable Investing
  3. Public Equities
  4. Fixed Income
  5. Public Credit 
  6. Private Credit
  7. Private Equity
  8. Real Estate
  9. Spotlight: Crypto’s Wild Ride
  10. Disclaimers

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