Docile Week? | January 14, 2022

AUTHOR: Jason J. Roque, MS, CFP®, APMA®, AWMA®
TITLE:       Investment Adviser Rep – CCO
TAGS:   S&P500, NASDAQ, Inflation, Consumer

Docile week as markets reflected marginal losses? No, not at all… What really happened throughout the week?


Markets dug a large hole to start the week but worked its way out by market close. The bleeding ended up being minor, with the S&P 500 losing 0.1%. The move came as major bank analysts continue to report a hawkish Federal Reserve Bank (FRB) for 2022. They are not only likely raising rates but attempting to reduce their balance sheet during the 4th quarter.


The S&P 500 rose 0.9% and the Nasdaq rose 1.4%. This came after an early drop in markets. The initial risk-off environment was fostered by testimony from FRB chair Powell in the morning. That testimony ultimately confirmed thoughts for investors that the trajectory for rates in coming months will be on the rise.


Consumer Price index (CPI) data out on Tuesday showed a 0.6% increase for the month of December. That monthly reading led to a 7.0% YoY reading. The S&P 500 rose 0.28%. While the YoY number rose, the monthly increase was down from the last two months.


The day started in the green and faded hard into the red. The S&P 500 ended up losing 1.42% on the day. FRB officials spoke publicly on Thursday about the Banks intent to start raising rates as early as March. The FRB will do this often in an effort to telegraph their actions. By doing so, they prevent a much broader sell off at the time of the increase.


Markets floated just under water for the majority of the day. Retail sales missed expectations by a wide margin. Additionally, preliminary readings for consumer sentiment show the metric falling into the 60’s. Outside of the pandemic, we haven’t seen sentiment in the 60’s since 2011. Coincidently, that was the last time we saw inflation above 2%. The S&P ended up pulling into the green for the day ending at a 0.08% rise.


The S&P 500 did lose 0.3% for the week. This comes across as a fairly mild week when taken in total, however intra-week volatility absolutely told another story. The increase in recent volatility is not surprising given the interest rate forecasts for 2022; however, I should remind people that the docile nature of 2021 is not the norm.

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