The Profit Margin: April 11, 2022
Statistic of the Week
From a net worth perspective, 2021 was a good year for America’s richest people. The wealthiest 1% reached a record $45.9 trillion in net worth in 2021, an increase of $12 trillion since the pandemic began. Share prices of public equities were the major drivers for the increase.
Global Perspective
While inflation in the US is high, it’s skyrocketing in Turkey. March’s annualized inflation rate in the country was 61%. Energy prices shot up 103%, transport expenses rose 99%, and food prices increased 70% year over year. In its most recent move, the Turkish central bank cut interest rates by 5%.
Market Moving Events
Tuesday: CPI Wednesday: PPI Thursday: Jobless Claims, Retail Sales, Consumer Sentiment Friday: Industrial Production, Empire State Manufacturing, US Markets Closed
Commentary
Comments by Federal Reserve officials, the release of meeting minutes from the last Fed meeting, and an increase in bond yields increased volatility in the markets last week and pushed the major equity averages lower. The Nasdaq, dominated by tech names and arguably the most interest rate sensitive of the three averages, faired the worst, dropping -3.86%.1 The well-diversified S&P 500 retreated -1.27%.2 And the DJIA was the week’s best performer, dropping only -0.28%.3 As noted, interest rates jumped during the week. The yield on the 10-year Treasury rose 0.34% to finish Friday at 2.71%.4 The tipping point for the volatility came when Lael Brainard, a member of the Fed’s Board of Governors, made comments that the organization’s balance sheet would need to be paired at a “rapid pace.”5 Notably, Brainard had been viewed as one of the Fed’s more dovish members.6 Following her comments, the release of the March meeting minutes indicated that there was broad support for a 0.50% rate hike rather than the 0.25% hike that was implemented.7 Beyond that, the minutes detailed the plan to begin shrinking the balance sheet by $95 billion / month.8 That’s a lot of hawkishness to digest. Jamie Dimon, CEO of JP Morgan may have said it best, “If the Fed gets this right, we can have years of growth, and inflation will eventually start to recede. In any event, the process will cause lots of consternation and very volatile markets.”9 That’s exactly what we are experiencing. – Dan McElwee, CFP, ® MBA
Chart of the Week
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Sources
Statistic of the Week:
CNBC.com
Global Perspective:
The Economist
Market Moving Events:
MarketWatch.com
Chart of the Week:
Haver, Clearnomics, Bureau of Labor Statistics
Commentary:1.Bloomberg2.Bloomberg3.Bloomberg4.Bloomberg5. Investor’s Business Daily6. Investor’s Business Daily7. Barron’s8. Barron’s9. Barron’s