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CIO�S NOTE
CIO’S NOTE
FERMON REID
CHIEF INFORMATION OFFICER
2021 was a year characterized by economic recovery. U.S. GDP grew by 5.7%, the largest gain since 1984. Following a year of uncertainty and anticipation, the economic recovery was supported by historic corporate earnings and vigorous economic activity. Economic trends in the United States accelerated as coronavirus vaccination rates increased, restrictions eased and more of the world returned to a new form of normalcy. However, this recovery faced plenty of challenges, including new COVID variants, supply chain bottlenecks and rising inflation. In 2021, we saw inflation reach highs we have not seen in 40 years and a disrupted global supply chain that could not keep up with the increased demand for goods.
The first half of the year was marked by vaccine rollouts, enhanced economic growth due to stimulus and the first signs of runaway inflation. However, these were not the only market phenomena of the year. In early 2021, we saw individual retail investors team up on Reddit and shock Wall Street by raising the price of videogame retailer GameStop and other “meme-stocks” to newfound heights. Shares of GameStop rose 400% in the last week of January, closing at an all-time high of $347.51. The labor market was slowly improving, with vaccines becoming more readily available and more people heading back to work. The unemployment rate fell to 5.9% by the end of June. Consumer spending capacity was significantly increased because of the massive $1.9 trillion stimulus package increasing economic activity. During Q2 of 2021, inflation drastically increased as the disrupted supply chain could not keep up with the demand for goods and services. Despite the increasing CPI and PPI numbers, the Federal Reserve and Jerome Powell insisted these price increases were only transitory.
During the summer, the Delta variant of COVID-19 began to spread across the globe rapidly. Originating in India, the Delta variant was more contagious than any other strains of the virus. The Delta variant caused countries to reinstate their previous lockdown measures and halted many companies’ return-to-the-office plans. Global supply chain shortages were amplified as a result. Throughout Europe and Asia, factories were forced to slow down or stop production, crippling an already-battered supply chain. Consumer and producer prices continued to soar largely in part due to the continued supply
chain disruptions. Despite the obstacles from the Delta variant, the unemployment rate fell to 4.9% in September, and jobless claims fell to post-pandemic lows.
In Q4 2021, inflation showed us it is not transitory. CPI rose 6.8% annually in November, the largest annual increase since 1982. CPI continued to rise in December, increasing by 7% from a year ago. Gasoline prices were up 49.6% YoY, meats, poultry, fish and eggs were up 12.5% YoY, and the price of used vehicles was up 37.3% due to continued chip shortages. Unfortunately, inflation is here to stay and will continue to rise until the Federal Reserve starts to raise rates. The emergence of the Omicron variant led to the most daily coronavirus cases since the beginning of the pandemic. Despite the challenges presented by the Omicron variant, the stock market proved it could look beyond case numbers.
Arguably the greatest bull market of all time will more than likely come to an end in 2022. The Federal Reserve is being forced to raise interest rates several times in hopes of combatting inflation. Oil and gas prices will be near all-time highs, and consumers worldwide will be paying for it at the pump. Geopolitical tensions between Russia and Ukraine will send commodity prices soaring and will continue to add uncertainty to our economy.
2021 was another solid year for the RGIP. At the end of the year, our growth portfolio was up 17.91%. Information Technology was the top-performing sector within the growth fund. Stocks such as Microsoft and HubSpot excelled, posting returns of 52.48% and 98.33%, respectively. The value portfolio had a positive return of 15.85%. Energy and Financials were the topperforming sectors in the value portfolio. Valero and Chevron had outstanding returns of 46.32% and 43.23%. PNC Financial Services and Royal Bank of Canada lead the pack in financials, boasting annual returns of 38.22% and 34.09%.
The mission of this program is to provide an invaluable learning experience by allowing students to manage money and learn from industry veterans. Under the tutelage and guidance of Dr. Hurst and Dr. Mascio, students excelled inside and outside the classroom. Our students placed 1st and 3rd at the CFA Institute Research Challenge’s Florida state tournament this past March. They beat out 13 other schools, including the University of Central Florida, University of Florida, Florida State University, University of South Florida, Rollins College and Jacksonville University. After winning the state tournament, our B team advanced to the regional tournament and finished as one of five final teams. Following graduation, students have accepted jobs at BNY Mellon, Siemens, Financial Technology Partners and Costa Development. One of our students plans to sit for the CFP (Certified Financial Planner) exam in July. Two students will be pursuing their master’s degree at Florida State University and North Carolina State University. Other students are currently working or have accepted internships at firms such as Atlantico Capital, BNY Mellon, United States Rentals, Calamos Investments, David Vaughan Investments and Regions Bank.
Throughout my time in the RGIP, I have watched myself and others grow tremendously. From the countless hours spent in the lab writing reports to the daily economic discussions, the program does a fantastic job replicating a real-world investment fund. My involvement with the program has been one of the highlights of my career at Stetson University. It has taught me invaluable lessons that will undoubtedly assist me and my classmates throughout our entire careers. Furthermore, this program has gifted us connections, friendships and relationships that will last a lifetime.
