| U.S. STOCKS FALL FOR THIRD STRAIGHT WEEK: 2022 has not started well for the U.S. stock markets. Last week was the worst week for the S&P 500 since March of 2020. Tech stocks and the speculative, unprofitable companies have suffered the most of late. The NASDAQ Composite stocks have been exceptionally hit hard. It is largely the prospect of higher interest rates which has shifted investors appetite for risk to begin the year. Even with the Fed rate hikes, interest rates will remain near historic lows. In another sign that risk was out of favor last week, cryptocurrencies were down with bitcoin, for example, dropping 11%. The geopolitical risk of a Russian/Ukraine/NATO problem also weighed on markets. |
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| U.S. LEADING ECONOMIC INDICATORS REMAIN HEALTHY: The Conference Board tracks a list of leading economic indicators into its index. That index rose 0.8% in December after a 0.7% advance in November. The Conference Board predicts that annualized growth of the U.S. economy in the first quarter will slow to 2.2% and be 3.5% for the entire year, a slowing from 2021, but still healthy. At the end of 2021 and into the beginning part of 2022, omicron dealt the economy a blow. But with omicron numbers peaking (see below), the economy is expected to pick back up and continue to grow but not with the speed of last year. |
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| FISCAL DRAG SHOULD MUTE INFLATIONARY PRESSURE: According to data compiled by Goldman Sachs, in the fourth quarter of 2021, about four percent of the U.S. gross domestic product (GDP) came from U.S. enacted fiscal measures including the child tax credit, infrastructure spending, education and state fiscal aid, safety net spending, public health spending and others. Due to the expiration of the expanded child tax credit and the lessening of some other payment streams, that will shrink to about three percent this quarter, 2.5% next quarter, about 2.0% in the third quarter and continually move downward until it levels off at about 1.0% later in 2023. |
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SALES OF EXISTING HOMES DECREASE IN DECEMBER: Sales of existing homes in the U.S decreased by 4.6% in December after three straight months of increases. Sales in December were 7.1% less than December of one year ago. Despite the decrease, sales in 2021 were 8.5% higher than 2020. A major reason for the slow down is that we are running out of existing homes to sell. Total housing inventory in December decreased by another 18% from the prior month and is down 14.2% from a year ago. Below you can see the trend of existing inventory which has been decreasing since 2007. Months of supply of existing home inventory is now down to 1.8 months, a record low, and it is likely to get lower next month.
(Sources: nar.realtor/newsroom/annual-existing-home-sales-hit-highest-mark-since-2006 AND calculatedriskblog.com) |
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| FOOD INSECURITY: The economic jolt/disruption caused by COVID lockdowns will take a long time to repair. The food insecurity problem exacerbated by the Great Recession took ten years to recover. In 2019, the United States Department of Agriculture happily reported that the amount of people in the U.S. who were food insecure the year before (2018) had finally dropped below the level it was prior to the 2008 recession. In 2018, 14.3 million households were reported to be food insecure. In 2019, it dropped again to 13.8 million. According to the U.S. Department of Agriculture, over 38 million people in the United States don’t have access to enough food now, almost triple the 2019 number. |
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| CONTINUING TO WATCH THE DATA: U.S. deaths climbed again this week by almost 7% from the week before. Global deaths increased for the second straight week, this time by 9% (upper right in the images below). In South Africa, deaths are now coming down. This makes sense because infections peaked some time ago. In the UK, deaths have leveled off. 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 appear to have peaked, the leading indicator 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 went up by another 5.7%, a much slower trajectory all of a sudden. In a similar pattern to other countries hit by omicron, the U.S. infection rate quickly turned around and dropped by 11% lasts week. According to an analysis done by Reuters midway through last week, the Northeast U.S. has seen a 40% drop in infections. We probably need another week to make sure this was a real peak and that hospitalizations are ready to hit a peak, but it would make sense based on what we are seeing around the world. Global infections are still rising, but the rate is decreasing quickly. The global rate increased by 9% last week, after 27% the week before and 42% the week before that. (Sources: covid.cdc.gov/covid-data-tracker AND worldometers.info/coronavirus/ AND reuters.com/world/the-great-reboot/is-covid-retreating-us-data-paints-encouraging-scenario-2022-01-21/). |
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| I’M NOT SUPERMAN AFTER ALL: I finally succumbed. On Monday, my wife tested positive, but I still thought I was impervious. And then came the symptoms, followed by this on Wednesday: |
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| As with most people these days, thank God, the symptoms were mild, and as of this writing, I feel 90% better, as does my wife. As we all seem to be getting it, I hope you are either an exception, or your experience with it is as easy as ours has been. |
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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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| “I’ll tell you how you know when you’re on something good: when everybody starts to tear up when they’re leaving, when they’re wrapping for the season. You know, when you say, “All right, we’re done with McGillicuddy. That’s a wrap for McGillicuddy!” And everybody applauds, but everybody’s sad, because McGillicuddy’s going to be gone! You know, it’s like family going off to college or war. You have this intimate relationship with these people, and then – bam! – they’re gone.” Louis Anderson
“You should mind your own business and work with your hands,…so that your daily life may win the respect of outsiders and so that you will not be dependent on anybody.” I Thessalonians 4:11-12 (NIV) |
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SOURCES:
FISCAL DRAG SHOULD MUTE INFLATIONARY PRESSURE: Goldman Sachs, Eventide Asset Management
FOOD INSECURITY: https://wilmingtonnewsjournal-de-app.newsmemory.com/?publink=0674a2460_13482fb AND courthousenews.com/u-s-food-insecurity-finally-down-to-pre-2008-recession-levels/
U.S. LEADING ECONOMIC INDICATORS REMAIN HEALTHY: usnews.com/news/economy/articles/2022-01-21/leading-indicators-suggest-economy-will-keep-growing AND msn.com/en-us/money/markets/us-leading-indicators-climb-08-25-even-as-omicron-dents-the-economy/ar-AAT0QI5 |
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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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