Market Update

January 2022 - Market Update The news that dominated 2021 continues to be the primary focus in 2022.  And, unfortunately, it will remain the case for at least the first quarter. The December data saw the fastest rise in the Consumer Price Index since the early 1980s, rising 7.0% from a year ago and 0.5% from November1.  For lack of a better way of saying it, this means the economy could be running too hot. So, what’s the Fed going to do about it?  The Fed began reducing the amount of asset (bond) purchases several months ago, [...]

December 2021 - Market Update The big news:  the Federal Reserve announced a widely expected acceleration in tapering to fight the elevated levels of inflation we have seen over the past 8 months. The pace the Fed will reduce bond purchases will be doubled, from a $15 billion to $30 billion reduction per month, putting the Fed on pace to have fully wound down bond market support by the spring. Further, the Fed now expects to raise rates up to three times in 2022. Overall, the market reacted favorably to the news, which came out December 15th [...]

November 2021 - Market Update After a few months of disappointing jobs reports, robust job growth came back in October, with 531,000 new jobs being added to the economy.1Adding to the good news, August and September's reports were revised upward by a combined 235,000 jobs. The newly added jobs helped the unemployment rate drop by 0.2% to 4.6%. The bad news is we're still roughly 4 million jobs behind pre-pandemic staffing levels. Businesses continue to struggle to find workers, especially in roles that are physically demanding. With a record 4.4 million people quitting their job in September and over [...]

October 2021 - Market Update Inflation remains at the forefront of market conversations with the latest Consumer Price Index (CPI) rising 0.4%1 in September. The bulk of the increase was food and energy – especially natural gas.  In previous months we saw sectors such as used cars, airlines and hotels had pushed prices higher, but those prices have begun to normalize.  The Fed has communicated measures to combat inflation likely beginning in November with the reduction in bond purchases that will naturally raise interest rates.  As rates increase, it is hoped that inflation will begin to ease.  [...]

September 2021 - Market Update Inflation remains the topic-du jour after a lower than expected August Consumer CPI report of 0.1% (vs an expected 0.3%). Will inflation start falling or remain stubbornly high? Our expectations are inflation will continue to grow into 2022 before leveling off and falling back to a 2.5% annualized number later in the year. Of course, that assumes supply chains, the Delta variant, and labor all begin to normalize this quarter. On the business side of things, the Producer Price Index (PPI) also showed increasing prices. Some (if not all) of these pricing increases will reach [...]

August 2021 - Market Update Inflation in July was back in-line with expectations following June's surprises. We're still seeing substantial inflation versus a year ago, but that is to be expected given the economic data from then to now.  Interestingly, used cars (which made up a whopping 50% of June's increase) were basically flat through July.  This has helped slow down core prices, which increased at a 0.3% monthly rate compared to June's 0.9%. Pent-up vacation demand caused lodging prices to rise 6.0%, slightly lower than June's 7.0% increase, causing shelter (including lodging and rent) to contribute [...]

A recent survey1 on social security conducted by Nationwide revealed some eye-opening stats. Interestingly, of those surveyed, 89% responded they were somewhat confident in their knowledge of social security.  However, when tested on the facts, some serious knowledge gaps emerged along with a general theme of uncertainty.  Here are some of the survey’s high and (low) lights: Only 16% correctly guessed their full retirement age The lowest knowledge levels were around taxation, inflation and Medicare Only 45% correctly answered that benefits are not tax-free Only 6% correctly identified all factors that determine the max benefit one can receive [...]

July 2021 - Market Update These days, everything is about the Fed.  Fed Chairman Powell has continued to defend the Fed's accommodative policy in testimony to Congress.  However, he noted the central bank is keeping a close eye on inflation numbers, which have spiked over the last number of months. The Fed believes the rise in inflation to be a temporary effect of the recovery from the economic shutdowns, stimulus, and a shift in spending patterns.  It is our expectation inflation will rise throughout most of 2021 and begin to recede in 2022. Speaking of inflation, June's [...]

June 2021 - Market Update It feels good to have a month of relatively slow news, data, and markets. While inflation reports are grabbing the headlines, along with the occasional meme stock and cryptocurrency saga, equity markets have been relatively stable. Short-term bouts of volatility have come and gone in recent months, but consistently good economic data is helping markets.  As evidence, both the Nasdaq and S&P 500 have made new highs. The "big" news of the month was the Fed's meeting to discuss interest rates and bond purchases.  As you know, these have been the primary [...]

May 2021 Market Update After a streak of positive jobs data, April’s payroll numbers MASSIVELY missed expectations. The economy adding just 266K jobs during the month vs an expectation of nearly 1M.  In short, this was one of the largest downside misses on record.  The economy is still more than 8 million jobs short of the pre-pandemic levels and the unemployment rate ticked up a notch to 6.1%.  The good news is we do not see this as that big of a deal given the context of other positive economic data.  Jobs had been growing at an unsustainably [...]

Not A Happy St. Patrick’s Day for Bonds!?Investors with exposure to bonds have been asking two primary questions.  The first centers around whether current interest rate trends will continue.  The second, builds upon the first and relates to future bond return expectations given the current direction of interest rates.Question 1:  Are interest rates going to continue to rise?They could, but given the moves we have seen so far, it would be unusual to have further yield increases from this point if the equity markets continue their bull run. It is important to keep in mind that rising yields during periods [...]

Yields Rising Market Diving All eyes are on interest rates as the 10-year Treasury yield continues to grow.  Rates are rising on increasing optimism the pandemic is coming to an end and the economy will return to “normal.”  If true, and the economy begins to gain speed, then the Fed may be forced to raise short-term interest rates to combat inflation. Fed chair Powell told Congress this week that he has no intention of reducing its broad support for the economy or raising rates because the fears of inflation are overblown.  This difference of opinion between markets and Chairman [...]