Is it bull season or bear season?
Is it bull season or bear season?
What the Market? - Dec 20, 2021
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What the Market?
Mr. Market, we can’t take it anymore! Will you just make up your mind? What do you need? How about a plethora of economic data? Will that help? The holidays are coming up and we could use a little clarity. Analysts are feeling a bit more confident for the future after the FOMC meeting in which the Fed outlined a more hawkish monetary policy approach. We’ll also have a plethora of economic data heading into the holiday weekend to keep an eye on.
What’s driving the market?
The Fed has spoken: In response to a “strengthening labor market and elevated inflationary pressures, the Fed announced that it will double the pace at which it winds down its asset purchasing program - which should come to a full stop by March 2022. The Fed also signaled a strong likelihood of an interest rate hike next year. So far, so good. The only unexpected comment was Powell’s remark on valuations looking “somewhat elevated”. Hint: That’s Fed-speak for nonsensically high.
Whose inflation is it anyway? The Fed’s preferred form of tracking inflation, the Personal Consumption Expenditure report, will be released on Thursday. The report’s results are likely to cause some volatility as inflation is expected to climb .6% month over month. This would be the 11th consecutive increase and wrapping the highest annual figures since 1991 at 4.5% annually. The Fed’s forecast looks supportive of the macro environment, and it can still readjust if Omicron proves to be worse than expected. For now, we are still comfortable with the Fed’s actions.
What’s an investor to do?
Investor mindset
You want the volatility? You can’t handle the volatility! Seriously, so many ups and downs but honestly, the economic backdrop is looking better. Furthermore, policy decisions seem to align with what’s needed at the time. What comes down must come up? Something like that. In Any case, equity markets are still flirting with ATHs so it can’t be all bad right?
Portfolio management
The short week ahead should provide some time to continue analyzing your positions heading into 2022 and take advantage of some buying opportunities that have risen due to the recent Covid outbreak and restrictions. Don’t fret too much and enjoy the holidays!
Keep an eye on the economy
Consumer Confidence: On Wednesday, the Conference Board will release its Consumer Confidence index. The measure is expected to continue increasing at a slower rate (exp. 111 vs 109.5 in November), but still significantly below pre-pandemic levels (high 120s). Analysts will be looking for clues regarding the importance of inflation to consumers as well as further pandemic fears. Be sure to also look into the Personal Consumption Expenditure report for a better gauge on inflation.
Upcoming Earnings
Nothing noteworthy
Economic Calendar:
Monday: PBoC interest rate decision
Tuesday: Eurozone consumer confidence
Wednesday: UK GDP data, Chicago Fed national activity index, US GDP data and consumer confidence
Thursday: US PCE figures, jobless claims, durable goods orders, consumer sentiment and housing data
What we’re vibing:
Afghan Woman Diaries by Sodaba Haidare. For those interested in the situation in Afghanistan after the American troop withdrawal, here is an insightful view from the other side. Quite intense reading.
Lazy: A Manifesto by Tim Kreider. An essay for the modern age. How we’ve used the term “busy” to fill our lives with this self-imposed, and unending, condition of living. Are we really too busy? Are we all saving lives? What is it that we’re doing that we’ve become “planshoppers?” Kreider’s short essay is great for a bit of end of year reflection as we look to spend time with family and loved ones.
Resources
A content guide to investing (books, books, books!)
Disclaimer
This writing is for informational purposes only and the author/s undertake/s no obligation to update this article even if the opinions expressed change. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. It also does not offer to provide advisory or other services in any jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. The author/s expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.