The Profit Margin: January 24, 2022
Statistic of the Week
A recent survey shows that an American needs to earn $122,000 to feel “financially healthy” – about twice the national earnings average. The study also found that fewer Americans (34%) felt financially healthy in the fourth quarter than they did in the first quarter of 2021 (48%).
Global Perspective
Although the reading was taken before omicron struck the UK, in November, GDP rose above its pre-pandemic level for the first time. At the same time, Britain’s inflation rate rose to 5.4%, it’s highest reading in the past 30 years.
Market Moving Events
Tuesday: Case-Shiller Home Price Index, Consumer Confidence Wednesday: New Home Starts, FOMC Statement Thursday: Jobless Claims, GDP, Durable Goods Orders, Pending Home Sales Friday: PCE Inflation, Consumer Spending, Consumer Sentiment
Commentary
In a shortened holiday week, volatility rushed into the equity markets as concerns about Federal Reserve policy, inflation, geopolitical tensions, and earnings misses from key companies all soured investor sentiment. The volatility index (VIX) rose about 50% on the week – jumping about 15.5% on Friday alone.1 As volatility rose, major indices retreated. The Nasdaq was the week’s worst performer, dropping -7.55%.2 The S&P 500 fell -5.68%3 while the DJIA dipped -4.58%.4 The move in equities was not necessarily offset by investors rushing to fixed income. In fact, the 10-year Treasury yield hit a pandemic high during the week and finished Friday with a yield of 1.75%.5 To heighten matters, crude hit multi-year highs.6 We expect volatility to remain elevated in the week ahead. Half of the thirty components of the DJIA report earnings this week.7 There will be a FOMC meeting statement along with a press conference with Fed Chair Powell. GDP for the fourth quarter will be reported and there will be key releases on the state of the consumer with both spending and sentiment figures. To add to the mix, there will also be a release on the state of inflation. While we are in the midst of a volatility spike, the underlying economy still appears to be on firm ground. Last week’s Leading Economic Indicators report (chart right) demonstrated continued strength. While uncomfortable, periods of higher-than-normal volatility can provide opportunity for long-term investors. – Dan McElwee, CFP, ® MBA
Chart of the Week
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Sources
Statistic of the Week:
Investor’s Business Daily
Global Perspective:
The Economist
Market Moving Events:
MarketWatch.com
Chart of the Week:
Haver, Clearnomics, Census Bureau
Commentary:1. Barron’s2.Bloomberg3.Bloomberg4.Bloomberg5.Bloomberg, Investor’s Business Daily6. Investor’s Business Daily7.Investor’s Business Daily