Week in Review: February 11, 2022

Equity markets, as measured by the S&P 500 ended the week lower on concerns about rising inflation, Federal Reserve policy, and geopolitical tensions between Russia and the West over Ukraine.

The release of the January CPI report on Thursday did nothing to dissuade from the idea that prices continue to face strong upwards pressure. On the heels of the report, St. Louis Fed President, James Bullard, said that he would like to see the Fed funds rate at 1% by July. That was enough to increase market expectations for a 0.50% Fed rate hike in March from 25% to nearly 100%. Bullard’s comments also helped to push the 10-Year above 2.0% for the first time since July 2019. While there is nothing fundamental about 2.0%, it is an important psychological threshold for the markets.

Oil reached its highest level since 2014 as tensions between Russia and the West over Ukraine continued to intensify. On Friday, the US urged all its citizens to leave Ukraine over fears that Russia could invade within a matter of days. A call between Presidents Biden and Putin did little to reduce tensions.

Through Friday, 72% of S&P 500 companies had reported 4Q21 earnings. Thus far, 77% have beaten both their earnings and revenue estimates. According to industry group FactSet, aggregate S&P 500 earnings growth for 4Q21 is expected to be 30%, which would mark the fourth consecutive quarter of 30%+ earnings growth.