Capital Ideas^TM

Global stocks ended the year with solid quarterly gains. Strong corporate earnings growth and ongoing government stimulus measures pushed markets to record highs despite the threat of rising inflation, higher interest rates and the rapid spread of the omicron coronavirus variant.

Information technology stocks rallied, gaining 13% as consumer-tech and semiconductor companies continued to drive markets higher. Utilities and real estate stocks also advanced amid a pronounced shift toward defensive sectors. Communication services stocks lost nearly 2% on concerns over slowing growth at some media and entertainment companies. Emerging markets stocks declined, hurt by slowing economic growth in China.

Bond markets came under pressure amid rising inflation and central bank actions to deal with it. The U.S. Federal Reserve (Fed) moved to reduce its bond-buying programme and indicated it will begin raising rates in 2022. The European Central Bank vowed to scale back its pandemic-related bond-buying activities. And the Bank of England raised interest rates for the first time in three years. Most U.S. bond sectors posted narrow gains, while global bonds generally declined.