Large-cap stocks showed solid gains in 2021, backed by robust year-over-year earnings growth. The Federal Reserve remained accommodative to support economic growth. Inflation and virus variants became the topmost worries for investors. The top-performing ETFs, Fidelity funds, and S&P 500 (SPY) members advanced in this milieu. Niche ETFs and selected S&P 500 winners gained double- and triple digits. Here is a list of the best, along with what to look forward to in 2022.

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The large-cap S&P 500 index had a remarkable 2021, gaining 28.6%. The benchmark recorded at least one new record close every month of the year. The S&P 500 registered 70 record high closes in total through the year, the most in a year since 77 in 1995.

The S&P 500 also outperformed other large-cap benchmarks such as the Dow Jones Industrial Average (DIA) and Nasdaq Composite (QQQ), which gained 20.9% and 22.2%, respectively.

The average stock did not fare as well. The small-cap Russell 2000 index gained 14.8% in 2021.

Robust growth in corporate earnings in the face of new COVID-19 variants, labor shortages, and disrupted supply chains drove the U.S. stock market’s impressive performance in 2021.

According to FactSet data, S&P 500 companies increased their earnings in the first three quarters of 2021 by 47.0%, 86.9%, and 36.7%, respectively. Analysts expect earnings to grow 21.2% in the fourth quarter, with EPS growth for all of 2021 amounting to 45.1%.

The Federal Reserve supported the economy through the year with near-zero interest rates and $120 billion in monthly bond purchases before outlining steps to cut back pandemic era stimulus in December.

As 2021 ended, the U. S. economy portrayed a healthy picture. Investors were concerned more about inflation than recession.

The omicron coronavirus variant continued to strain the health care system. Investors, however, stayed composed, focusing on indications of the omicron variant being milder than other virus variants. The omicron virus variant also raised hopes of accelerating the end of the pandemic.

Here, we look at what ETFs, Select SPDRs, Fidelity funds, and S&P 500 stocks returned the most in 2021.

Best ETFs of 2021

Ethereum, carbon credits, rare earth metals, uranium, and oil & gas were themes that worked well in the ETF world.

• Grayscale Ethereum Classic Trust, (ETHE) +145.1%
• KraneShares Global Carbon ETF, (KRBN) +106.7%
• VanEck Rare Earth/Strategic Metals ETF, (REMX) +80.2%
• North Shore Global Uranium Mining ETF, (URNM) +78.7%
• First Trust Nasdaq Oil & Gas ETF, (FTXN) +69.2%

Best Select Sector SPDR ETFs of 2021

The Energy Select Sector SPDR took the top position. Oil surged 55% in 2021 as demand increased from easing of COVID restrictions while OPEC & Russia limited production.

• Energy Select Sector SPDR, (XLE) +53.3%
• Real Estate Select Sector SPDR, (XLRE) +46.1%
• Financial Select Sector SPDR, (XLF) +34.8%
• Technology Select Sector SPDR, (XLK) +34.7%
• Consumer Discretionary Select Sector SPDR, (XLY) +27.9%

Best Fidelity Funds of 2021

Fidelity funds focused on semiconductors, housing, energy, and real estate claimed top honors. The shortage of semiconductor chips that started in early 2020 has continued through 2021, boosting share prices in this industry.

• Fidelity Select Semiconductors Portfolio, (FSELX) +59.2%
• Fidelity Select Construction and Housing Portfolio, (FSHOX) +57.6%
• Fidelity Select Energy Portfolio, (FSENX) +55.4%
• Fidelity Real Estate Investment Portfolio, (FRESX) +42.4%
• Fidelity Real Estate Index Fund, (FSRNX) +40.7%

Best S&P 500 Stocks of 2021

Two of the top five winners for the year were oil & gas producers, Devon Energy and Marathon Oil. COVID vaccine developer Moderna followed its five-fold increase in 2020 with another 143% in 2021. Other winners included cybersecurity solutions provider Fortinet and automaker Ford Motor.

• Devon Energy, (DVN) +191.1%
• Marathon Oil, (MRO) +148.9%
• Moderna, Inc., (MRNA) +143.1%
• Fortinet, Inc., (FTNT) +142.0%
• Ford Motor Co., (F) +137.4%

Looking ahead to 2022

The course of the stock market in 2022 is likely to be determined more by earnings growth than by support from the Federal Reserve’s interest rate policy. Investors will focus on the December jobs report and the FOMC December meeting minutes in the near term. Democrats are working to revive the President’s stalled Build Back Better bill in January.

Stock prices have risen from an increase in the price-to-earnings ratio valuation metric and growth in earnings. Stocks are likely to receive less help from valuation-metric expansion in 2022. Although analysts expect S&P 500 company earnings growth to slow in 2022 compared to 2021, stocks can gain in 2022 if earnings growth exceeds current expectations.

The December jobs report, due this Friday, is the focal event of the week. According to Dow Jones, economists predict the economy to add 405,000 jobs in the final month of 2021, up from 210,000 in November. They forecast the unemployment rate to drop to 4.1% from 4.2% in November.

The Federal Reserve releases the minutes of the FOMC’s December 14-15 meeting on Wednesday. Investors will look for details to assess when the Fed may be inclined to raise interest rates. The FOMC announced its plan to taper monthly bond purchases after this meeting.

Senate Democrats headed by Senator Schumer look forward to reviving President Biden’s Build Back Better bill this month. Conservative Democrat Senator Manchin is open to restarting negotiations after opposing it in December on cost grounds.

The earnings calendar is quiet before it picks up steam from fourth-quarter reports in the latter part of January. Few companies from the defensive consumer staples and healthcare sectors report this week. The reporting companies include Constellation Brands, Conagra Brands, Lamb Weston, and Walgreens Boots Alliance.