Russia situation Y’all. This week was a lot. Stocks were on a total roller-coaster ride as investors tried to digest updates of the Russia-Ukraine situation. The worst came with reports of an attack and then the Russian siege of a nuclear power plant in Ukraine (which btw happens to be the literal LARGEST IN EUROPE). You add nuclear into warfare and obviously people become v unsettled. There was a push and pull across the week as commodity prices got pushed higher, interest rates dropped, and stocks fell. Moral of the story: Historically, periods of conflict like this have proven to be great times to buy investments as markets typically overreact. It’s been…

Welp, it happened What a wild way to wake up Thursday morning to the news that Russia had invaded Ukraine. I’m sure everyone’s aware of the horrors happening on the ground, but here’s a little history lesson on why this is happening if you need a refresher. First things first, if you’re looking for a way to personally help, I donated to the UN’s Ukraine Humanitarian Fund that’s part of the UN’s crisis relief program – you can donate here. Secondly, the reaction in the market to the actual invasion was pretty crazy. Stocks started the day on Thursday down sharply but somehow reversed all losses of the day to end the day in the…

It’s not going away Bear with me, we’re going to talk about inflation again. The latest data on inflation came through this week in the form of the producer price index – basically this report tells us how much more (or less) producers are having to pay for their inputs, which gives us a good idea of how they’re going to change what they charge us for the goods they produce. This index increased 9.7% for January compared to the prior year, down slightly from the prior month but still way too high for comfort. Despite the rise in prices, regional manufacturing reports from New York and Philadelphia this week indicated…

Have you heard, this thing called inflation There were a couple big pieces of information that moved markets this week. The first was the January number for inflation, as measured by the Consumer Price Index. Inflation came in at a hot 7.5% overall, and 6% on a “core” basis, which excludes food and energy. This read on increasing prices was worse than expected and marks the sharpest annual increase in prices since February 1982. Moral of the story: The market is expecting more and more aggressive action from the central bank to curtail the impact of inflation by raising interest rates. Higher interest rates = lower present values for future earnings…

State of the economy The manufacturing and services sectors of the US economy grew for the 20th consecutive month in January, but not without the lack of headwinds, pulling down the rate of growth across the board. Manufacturers continued to experience a lack of labor (especially in the middle of the Omicron wave) and parts is causing backlogs to increase and prices to increase even faster. Moral of the story: Supply chain issues continue to be topical for companies that actually produce good, and it doesn’t seem like this is going away anytime soon. There are indications that at least the labor side is starting to get better but we’re still…

Policy changes coming Going into this week, I knew it was going to be a doozy. There were so many market-moving things happening, and I think we’re only part-way through the chaos. Anyway, the BIG thing that happened this week was the FOMC’s first meeting of 2022. It was largely expected that the Fed was going to announcing policy measures to get inflation under control, but we were waiting to hear just how far they would be willing to go. The Fed seems ready to raise interest rates as soon as March and is likely to reduce its balance sheet. Moral of the story: The market is expecting four interest…

State of manufacturing This was a fairly light week of economic updates (plus a holiday week, though it somehow felt like it lasted for ever), but we got a few regional manufacturing updates from the Philly and New York feds. In an unfortunate turn of events, the New York manufacturing survey plummeted into negative territory for the first time in 20 months. The Philly survey, however, continued to show improvement despite the omicron wave, indicating that some parts of the country will be faring better than others. Moral of the story: NY got hit hard and fast and first by the Omicron wave, which pretty much wiped out a large…

Inflation I’m fairly certain I’ve talked about inflation in the last few months more than I have in the rest of my life combined. Consumer prices increased 0.5% in December, bringing the annual rate to a whopping 7%, which is the highest level we’ve seen since June 1982. Some of the bigger culprits included used car prices, which have increased 37% in the last year, and gasoline prices, up almost 50% compared to 2020. Aside from those eye-popping numbers, we’re seeing pressure on prices across the board – apparel, food, rents, everything. Moral of the story: Rising prices have become the regulatory zeitgeist recently and it does seem like policy-makers…

What’s the deal with jobs? We ended the first trading week of 2022 with the December jobs report that was a little mixed. On the one hand, we only added about 199k new jobs, compared to expectations for closer to 422k new jobs. On the other hand, the unemployment rate fell to a new pandemic low of 3.9%, and within close reach of the 50-year low of 3.5% we were at just before the pandemic started. In good news for workers (but bad news for continued inflation), wages increased 0.6% in the month. Moral of the story: There were about 4m more jobs available than there were unemployed workers through…

Fed speak The most important news to hit the market was the Federal Reserve’s complete 180 in terms of policy. The central bank that had been waiting and waiting and waiting to change policy in the face of rising and rising and rising inflation decided to announce that they were not only putting on the brakes on their accommodative policy, but actively going to go the other way and tighten policy pretty aggressively next year. Moral of the story: The bank has kept interest rates at effectively 0% and pumped trillions of dollars into the economy since the beginning of the pandemic. They’re basically going to stop pumping cash into the economy in the…