Week in Review: February 11, 2022

February 14, 2022

Recap & Commentary

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.

Economic Commentary

Inflation dominated the economic headlines as consumer prices, measured by CPI, rose 0.6% for the month in January, and 7.5% compared to a year ago.  That was the fastest pace since 1982 and reinforced the idea that prices are continuing to go in the wrong direction. On a core basis (excluding more volatile food and energy prices), inflation rose 6.0%.

Consumer sentiment fell to its lowest level since 2011, as consumers’ views of both current and future conditions deteriorated. According to the University of Michigan, which conducts the survey, the entire decline was driven by households with incomes of $100K or more. Inflation was top of mind for many respondents, with nearly half saying they expect their inflation-adjusted incomes to decline in 2022. Inflation expectations for the next 12 months edged up 0.1% to 5.0%.

The US trade deficit rose $1.4B in December to $80.7B. For the year, the trade deficit increased 27% to a new all-time high of $859B, driven by soaring demand for goods. Imported goods reached a new all time high of $1.8T in 2021.

Weekly jobless claims fell 16K to 223K, below the expected 230K. After jumping to 290K in mid-January as Omicron cases skyrocketed, claims have now fallen for three consecutive weeks as Omicron and its attendant disruptions subside.

Of Note

Partly in response to the meme-stock trading frenzy of 2021, the SEC proposed reducing the settlement time for stocks trades from two days to one. Should the proposal take effect, it would help to reduce market risk, particularly during periods of heightened trading activity.

S&P 500 -1.8%
Small Caps 1.4%
Intl. Developed 1.4%
Intl. Emerging 1.6%
Commodities 0.3%
U.S. Bond Market -0.4%
10-Year Treas. Yield 1.94%
US Dollar 0.6%
WTI Oil ($/bl) $94
Gold ($/oz) $1,861

The Week Ahead

  • Producer Inflation (PPI)
  • Retail Sales
  • Industrial Production
  • Housing Starts
  • Existing Home Sales

Insights

Maximizing Your Investment Portfolio: The Role of Diversification in Wealth Management

Wealth management requires more than intuition or gut instinct; it’s a discipline rooted in strategy, expertise, and a clear understanding […]

Learn more

Week in Review: January 10, 2025

Recap & Commentary Markets ended the week lower, impacted by the good-news-is-bad scenario of unexpectedly strong jobs data which simultaneously […]

Learn more

Smart Reinvestment Strategies for Business Growth

Achieving sustainable business growth is about more than just scaling operations. It requires deliberate reinvestment strategies, careful financial planning, and […]

Learn more

Unlocking the Luxury Market: How a Custom Mortgage Can Elevate Your Homeownership Experience

For high-net-worth individuals, buying a luxury home is about more than just acquiring real estate—it’s about securing a property that […]

Learn more

How to Balance Growth and Preservation in Your Wealth Management Strategy

Wealth management is a nuanced art, especially for individuals approaching or enjoying retirement.1 The challenge lies in finding the right […]

Learn more

Ready to learn more?
Let’s have a conversation.

Embark on a banking experience tailored to your distinct path, focused on achieving personal and business financial prosperity.