| THE FED AND INTEREST RATES: “This is going to be a year in which we move steadily away from the very highly accommodative monetary policy that we put in place to deal with the economic effects of the pandemic.” This was part of a public statement by Chairman of the Federal Reserve Jerome Powell. While this surprised no one, it still moved markets during a volatile week. The Fed indicated that rate increases will be announced at the mid-March meeting of the Fed, and more increases will follow throughout the year. The Fed also announced that by March it will cease its accommodative asset purchases as well. |
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| U.S. ECONOMY HAD A STRONG FOURTH QUARTER: The U.S. economy, as measured by gross domestic product, grew at a 6.9% annualized rate in the fourth quarter. Remember the third quarter had a disappointing growth rate of 2.3% annualized. For the full year, growth was 5.7%, the fastest growth rate since 1984. Of course, this follows 2020 when we experienced negative GDP growth of 3.4%. |
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U.S. CONSUMERS TAKE A PAUSE: U.S. consumers have been steadily increasing their spending, but in December consumer spending decreased by 0.6% from the prior month. Inflation and omicron concerns seem to be the culprits. In addition, with supply chain issues many consumers may have completed their holiday shopping early. Still, December’s spending was 5.8% higher than December of 2020.
(Source: bea.gov/news/2022/personal-income-and-outlays-december-2021) |
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| A VOLATILE WEEK ENDS U.S. STOCK LOSING STREAK: Only because of a very late Friday rally the week ended positive for U.S. stocks. Corporate earnings have been leading the news followed by other fourth quarter economic data. On Friday, Apple reported record earnings and profits for the fourth quarter, and the rapid rise in its stock (over 7% on Friday) led a late Friday rally. Volatility will likely continue as investors parse their concerns about rising interest rates, inflation data, economic growth, Russia and omicron. Even with interest rates poised to rise, money will remain cheap and it seems too tempting whenever we have some sort of a dip for investors to jump. This seemed to be part of the dynamic on Friday. |
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| U.S. WORKERS GET BIGGEST RAISE IN DECADES: According to the U.S. Labor Department, labor costs increased by 4% in 2021, the largest annual increase since 2001. The report showed a 1% rise in the fourth quarter after a 1.2% rise in the third quarter, so perhaps the rate of acceleration is decreasing. |
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| ARE U.S. HOME PRICES GOING TO BEGIN TO LEVEL OFF?: Home prices in December were 18.8% higher than a year before. This after that figure was 19% the month before, so while prices are still rising this is one of several indications that the rising prices are beginning to level off. With prices knocking some consumers out of the market, and interest rates set to rise, demand is decreasing a bit. |
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| CONTINUING TO WATCH THE DATA: Infections and now hospitalizations have both peaked in the U.S., but the lagging indicator of U.S. deaths climbed again this week. Global deaths increased once again (bottom graph below). In South Africa and the U.K. deaths are now coming down. This makes sense because infections peaked some time ago. South Africa and the UK got omicron before the U.S. so the thought is they may be going through a pattern that will repeat in the U.S. Infections rose very fast, peaked fast, and then began to go down just as fast. As you can see below, U.S. infections and hospitalizations have peaked, the leading indicators needed before the death numbers can come back down. (Source: worldometers.info/coronavirus) |
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| HOSPITALIZATIONS AND GLOBAL INFECTIONS: The number of people in U.S. hospitals who are COVID positive took a decisive turn, going down by nearly 5%. The U.S. infection rate is now decreasing rapidly (see graph below). Global infections now appear to have peaked as well. We will know for sure next week. (Sources: covid.cdc.gov/covid-data-tracker AND worldometers.info/coronavirus/). |
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| I FEEL MY TEMPERATURE RISING: My COVID left as quickly as it came. I have no remaining symptoms, and I feel 100%, thank God. So my temperature is not rising. But, this last week, for reasons that take way too long to describe here, I saw my aunt Carol whom I had not seen in decades. It was a wonderful reunion with the woman who was married to my father’s youngest brother. During our conversation, my brother and I plied her with all sorts of questions, and eventually someone mentioned Elvis, a contemporary of Aunt Carol. “Oh I met Elvis,” Carol said. (In my mind, I was thinking, “sure you did.”). Carol said, “And I have a picture.” She explained that she and my uncle were in Texas at the army base where my uncle and Elvis were both stationed. On one occasion, when Aunt Carol and my uncle were walking into the PX, out came Elvis. She asked him if she would get in a picture with her, and the picture below was the result. She said he was very nice about it. I love Aunt Carol’s sunglasses and dress. And that sure is Elvis. |
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| Have an “all shook up” week! |
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Our mission is to help you see the objective, find the path, and navigate past the obstacles to a more prosperous future.
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Douglas R. MacGray, J.D., C.F.P. ®
President
Stonecrop Wealth Advisors, LLC
225 Wilmington-West Chester Pike; Suite 200
Chadds Ford, PA 19317
Direct | Cell | Fax
(610) 628 4545
dmacgray@stonecropadvisors.com |
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| “If you let your head get too big, it’ll break your neck.” Elvis Presley
“Therefore encourage one another and build one another up, just as you are doing.” I Thessalonians 5:11 (ESV) |
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SOURCES:
U.S. WORKERS GET BIGGEST RAISE IN DECADES: wsj.com/articles/us-employers-labor-costs-inflation
THE FED AND INTEREST RATES: wsj.com/articles/fed-tees-up-march-interest-rate-increase-11643223603?mod=article_inline
ARE U.S. HOME PRICES GOING TO BEGIN TO LEVEL OFF?: wsj.com/articles/u-s-home-price-growth-slowed-in-november-11643119207
U.S. ECONOMY HAD A STRONG FOURTH QUARTER: msn.com/en-us/money/markets/q4-gdp-us-economy-expanded-at-69-25-annualized-rate-topping-expectations/ar-AATaP3t |
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| (c) 2022 Douglas R. MacGray, All Rights Reserved |
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*S&P 500: This is a measure of the performance of the 500 largest companies in the United States, and it a common index to track the performance of U.S. equity markets, especially the large cap markets.
*MSCI All Country World Index X US: This is a broad measure of the performance of worldwide equity markets excluding the United States.
*Bloomberg Barclays U.S. Aggregate: This is a measure of the U.S. bond markets. |
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