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Week in Review: November 19, 2021

Recap & Commentary

Equity markets (S&P 500) bounced around in search of direction, finding little. With earnings season now largely over, investors focused on economic data, growing concerns about new COVID-19 cases, and who the White House will nominate to lead the Federal Reserve. In addition, the House of Representatives passed President Biden’s $1.75T social spending bill, sending it to the Senate for debate. Curiously missing from the headlines were the rapidly approaching deadlines for Congress to pass a longer-term government funding bill and raise the debt limit, both of which will expire in early December.

In Europe, Austria announced a new national lock down in an effort to contain surging COVID cases. In addition, the country mandated that all citizens be vaccinated by February 1, 2022. Facing a similar surge in cases, Germany’s Health Minister didn’t rule out a similar lockdown. In the U.S,, after leveling off in late October, new COVID cases are once again rising, creating renewed concerns about the potential economic impact. Reflecting those concerns and news that the U.S. had asked Japan, India, and China to join a coordinated effort to release oil from strategic reserves, oil settled at a seven-week low.

Once widely considered a shoo-in, there is now growing intrigue as to whether Jerome Powell will be renomintated to lead the Federal Reserve. Also under consideration is current Federal Reserve Governor Lael Brainard. The general consensus is that Brainard is more “dovish” than Powell, something to consider given the scrutiny the Fed is currently receiving regarding inflation.

Economic Bullet Points

Despite consumer sentiment falling to a 10-year low in October, consumers continued to do what they do best, shop. Retail sales rose 1.7%, better than the consensus forecast of 1.2%. However, the headline level does not adjust for inflation, which accounted for nearly half of the increase. While there remains a tendency to state that consumers are flush with cash thanks to pandemic-era stimulus, the personal savings rate is now back to pre-pandemic levels.  Thus, it remains to be seen whether consumers are truly embracing more spending, or simply pulling forward holiday purchases in an attempt to ensure that gifts arrive on time, as well as to avoid further inflationary price increases.

Manufacturing activity in New York and the Philadelphia area accelerated in October. With respect to inflation, manufacturers in both regions continued to experience higher input prices. However, prices received also rose, suggesting that manufacturers are successfully passing along at least some of the price increases to customers. New orders were also strong in both regions.

Housing starts slowed to their lowest level since April, slipping 0.7% from September, hampered by ongoing supply chain issues and a lack of labor.  According to the National Association of Home Builders, there were ~333K job openings in the construction industry in September.

Weekly jobless claims fell 1K, to a new recovery low of 268K.

Of Note

The Centers for Disease Control and Prevention (CDC) recommended booster shots for all people over the age of 18 who initially received the Pfizer or Moderna vaccines and are now at least six months removed from their second dose.

S&P 5000.3%
Small Caps-2.8%
Intl. Developed-0.8%
Intl. Emerging-1.3%
Commodities-0.5%
U.S. Bond Market0.1%
10-Year Treas. Yield1.54%
US Dollar1.0%
WTI Oil ($/bl)$77
Gold ($/oz)$1,849

The Week Ahead

  • New Home Sales
  • Existing Home Sales
  • PCE Inflation
  • Durable Goods Orders
  • Markit PMI
  • Consumer Sentiment
  • Weekly Jobless Claims

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