U.S. stocks once again dominated global investment markets in 2021, far surpassing other asset classes. It was a good year for risk-assets with equities, commodities, credit-sensitive bonds and hedge funds posting strong gains. As the recovery from the coronavirus pandemic gained momentum, shortages in labor and materials created supply bottlenecks that drove inflation to the highest level in 40 years. Spooked investors piled into inflation-sensitive assets such as real estate and high yielding sectors with the potential to generate positive returns net of inflation. Energy-related assets, including stocks and commodity futures, made a stunning comeback and were top performers in 2021 after experiencing substantial losses the prior year. On the other hand, safe-haven assets, including government bonds and gold, were weighed down by rising interest rates. Emerging markets also had a difficult year, reflecting the regulatory crackdown in China and greater challenges fighting COVID-19 compared to developed countries.

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