Year-End Finance Review: The 5 Biggest Financial News Stories of 2021

2021 was an important year for the American economy and for consumers on a personal level. After the pandemic fueled uncertainty and fear throughout 2020, many were waiting to see how it would impact the economy. The US economy contracted 3.5% in 2020, the worst contraction since World War II, but was expected to grow an estimated 6.5% in 2021, the fastest pace in three decades. No one knew how quickly the economy would recover, and generally abnormal trends left many feeling uneasy. These are the five biggest financial trends we have seen in 2021 as we prepare for 2022.

  1. Inflation
    After the pandemic’s impacts on the global economy in 2020, many were predicting that we would see a delayed recession in 2021. While this did not come to fruition, we have seen rising inflation rates that have many consumers and economic experts concerned.  The Consumer Price Index (CPI) indicates that the annual rate of inflation in the United States hit 6.2% in October 2021, the highest in more than 30 years.

    Opinions differ as to why we’re seeing this extreme rate of inflation. A few obvious suspects include the supply chain shortages resulting from COVID, the government stimulus checks, and labor shortages. Some argue that referencing CPI may be exaggerating the situation slightly because this time last year the cost of goods and services was artificially lowered by government shutdowns. Now that consumers are eager to support local businesses and get out of the house, spending has increased while lingering supply chain issues have constricted supply, creating the perfect storm for prices to rise.

    Regardless of the cause, it’s clear that there is a global trend of inflation post-pandemic. Most countries saw a flat inflation trendline in the years preceding the pandemic, falling inflation in the latter half of 2020, and rising inflation beginning in the second quarter of this year. Economists are monitoring this trend closely to see how it may begin impacting other areas.

  2. Cryptocurrency and Blockchain
    Cryptocurrency is certainly not a new trend, but there have been several significant events in 2021 that will shape the future of alternative currencies. Bitcoin outperformed the stock market in 2021 and several other less mainstream cryptocurrencies have performed even better. As of November 30, Bitcoin had gained 97% on a year-to-date basis.

    Possibly the most notable trend is the increased institutional adoption of digital currency. Mainstream financial institutions are shaping plans to support and even encourage crypto adoption. Central Bank Digital Currencies (CBDCs) are emerging as a government-backed alternative to decentralized currencies. 

    In 2021, we also saw the rise to fame of NFTs. NFTs represent claims to things like domain names, physical or digital artwork, collectibles, and video game add-ons and usually have embedded smart contracts that describe the digital or physical product they represent. Beyond its potential for investment, NFT technology is solving copyright and ownership issues that have hindered digital artists.

  3. Pandemic Stocks
    In 2020, many people invested heavily in “stay at home” or “pandemic” stocks. Companies like Peloton, an alternative to the gym, and Netflix, an alternative to movie theaters, were growing exponentially as everyone realized we may be under quarantine restrictions longer than expected. Zoom and Peloton saw shares rise roughly 400% in 2020. In 2021, however, we have seen these stocks begin to fall and underperform. Shares of Peloton and online education company Chegg are both down roughly 70% this year; digital real estate marketplace Zillow and virtual healthcare company Teladoc down over 50%, Zoom and smart TV company Roku down roughly 40%.
  4. Biden Administration Economic Plan

    President Joe Biden ran on an economic plan that included bolstering the middle class, expanding healthcare, raising taxes on the wealthiest, and investing billions of dollars in green energy infrastructure. To that end, he has enacted several policies, including:

    1. American Rescue Plan Act:A $1.9 trillion plan that gave direct stimulus payments of $1,400, extended unemployment compensation, continued eviction, and foreclosure moratoriums, and increased the Child Tax Credit while making it fully refundable.
    2. $80 billion in aid to state education agencies and $39 billion to childcare providers to help reopen their facilities.
    3. $300 weekly enhancement to unemployment benefits and federal income tax breaks on $10,200 in unemployment compensation for those earning less than $150,000.

The Biden administration has also proposed several changes to tax policy in a three-part program: The American Rescue Plan Act, The American Jobs Plan (proposed), and The American Families Plan (proposed). The plan’s biggest proposals are to raise the highest individual tax rate and the corporate tax rate. The administration also wants to give additional funds to the IRS to reduce lost tax revenue from inadequate audit capacity. The administration’s plans and policies will be critical as we continue to face inflation.

  1. Skyrocketing Housing Prices

    In 2021, the demand for homes outpaced supply, creating an intensely competitive and seller-friendly housing market. There is no sign of this trend slowing down. Zillow published a report predicting U.S. home prices will climb 13.6% between Oct. 2021 and Oct. 2022. However, this prediction is just that – a prediction. The Mortgage Bankers Association forecasted a 2.5% price drop by the end of 2022. If it sounds like the housing experts are confused, it’s because we’re facing some unknown factors.

    Firstly, supply chain shortages have raised the price of lumber and delayed building for the past 18+ months. This trend could continue, or the situation could improve, which would increase the availability of homes. Secondly, no one knows for sure how mortgage rates will react. Due to inflation trends, it’s possible they will rise, but no one knows how significantly. This uncertainty is putting pressure on lower income families and millennials trying to purchase their first homes.

These trends and events are important to keep in mind as we enter 2022 because they will shape our financial decisions in the year ahead. No one knows for sure what we can expect but monitoring trends and working with a trusted financial advisor can help set you up for success in this uncharted territory.


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