Welcome to my first video presentation of 2022. For a condensed transcript of my remarks, read the article below.

The year 2021 was a challenging time, amid a persistent pandemic, rising inflation, and toxic politics. What’s more, the Federal Reserve is set to hike interest rates this year, perhaps as many as three times.

Throughout 2021, the Fed pumped liquidity into the markets to keep equities afloat. This year, the Fed is taking a more hawkish stance, which is making investors uneasy.

And yet, as my favorite crooner famously sang: “It was a very good year.” If you had listened to the naysayers in 2021 and played it too safe, you would have left a lot of money on the table.

Now that the books have closed on 2021, we can see that the S&P 500 racked up its sixth best performance last year in more than 30 years (see chart).

The S&P 500 closed 70 days at all-time highs in 2021, nearly beating the record of 77 days that was set in 1995. Despite the drama of the daily news headlines, the S&P 500 last year never posted a pullback in excess of 5%.

The two best performing asset classes in 2021 were U.S.-based large caps (+29%) and commodities (+27%). The two worst performing last year were emerging market equities (-3%) and international bonds (-7%). Growth stocks narrowly beat value.

All 11 S&P 500 sectors posted double-digit gains in 2021, led by energy. Income-oriented sectors underperformed, with utilities as the biggest laggard. My video provides a detailed sector-by-sector breakdown.

Trading in the final week of the year was muted with modest losses, but the week capped another banner year for stocks (see chart).

Robust consumer demand, economic reopening, and a dovish Fed fueled last year’s gains. Stocks also were kept aloft by extremely low yields on Treasury bonds, particularly the 10-year yield, which has held to about 1.5%.

The unloved economic expansion…

Polls show that most Americans view the economy as terrible and getting worse. Inflation and a drumbeat of negativity in partisan media have given many people this impression, but it’s divorced from reality. The fact is, the economic recovery is intact, and people are flush with jobs and savings.

Americans say they hate the economy, but they’re spending as if they love it. Record retail sales during the 2021 holiday season helped fuel a “Santa Claus” rally. The momentum is set to carry over into the new year.

Read This Story: Worried The Economy Is Tanking? Don’t Be

Goldman Sachs’ (NYSE: GS) latest forecast calls for U.S. gross domestic product to grow 3.8% on a full-year basis in 2022. The consensus on Wall Street also calls for inflation to eventually moderate in 2022, as supply chain dislocations get ironed out.

Stocks are on pace for another strong year, but gains aren’t likely to be as robust as 2021. The Fed’s tightening this year is likely to prove a headwind, but not a bull market killer. Corporate earnings growth is poised to continue its winning streak, but at a slower level. Omicron is straining the public health system, but scientists predict that the variant will peak by mid-January.

The biggest issue in the coming months for investors will be inflation and the Fed’s response to it. As usual, the central bank must pull off a balancing act, by keeping a lid on inflation without undermining growth. The Fed’s success, or lack thereof, will play a major role in the direction of stocks.

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John Persinos is the editorial director of Investing Daily. Send your letters to: mailbag@investingdaily.com. To subscribe to John’s video channel, follow this link.