• Surprise!

    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…

  • A rollercoaster ride

    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…

  • Stocks on sale

    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…

  • Earnings season is back

    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…

  • Happy New Year

    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…

  • Closing out 2021

    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…

  • Feeling good

    Coming in hot The big report of the week was inflation – CPI, which measures the changes in the cost of a basket of goods – increased 6.8% in November compared to the prior year. This is the highest increase in prices this country has seen since 1982. This print was slightly above expectations of a 6.7% increase in prices. And the inflation was apparent across literally every category. Gas prices are up 58%, food prices are up 6%, car prices are up 31%, apparel up 5%, blah blah. Even though pay increases have increased 4.8% over the same time, obviously not even close to keeping up with the increase…

  • Whiplash

    Ugh. So, we’ve gone back and forth on the jobs status the last few months – first from the delta wave, then the lack of a delta wave, and now November’s report, which was seriously far below expectations. We only added 210k jobs in November, down from the 546k we added in October, and well below expectations for 573k new jobs. Even though we missed on the job creation, we did manage to bring the unemployment rate down to 4.2%, down 0.4% from the prior month. Moral of the story: At this point, we’ve recovered all but 3.6m jobs that were lost during the pandemic. A lot of companies also…

  • Uh oh COVID is back

    Wrapping up earnings At this point, about 95% of S&P 500 companies have reported their financial and operating results for the third quarter. Driven by strong demand, 81% of these companies have reported results that have exceeded Wall Street’s expectations, on track to grow earnings by over 42% compared to this time last year. This week’s headlines were made by our friendly neighborhood retailers like Walmart, Target, Macy’s, Home Depot and others – all indicating consumers are healthy and ready to shop until they drop. Despite revenues (driven by consumer demand) being really strong, there’s been a big theme during this earnings season – higher costs impacting the bottom line.…

  • Glasgow Climate Pact

    Hot, hotter, hottest The consumer price index (CPI), which measures the changes in the price of a good of baskets over time (aka inflation), increased 6.2% on an annual basis in October. This is the highest reading in the index since the end of 1990. If you exclude food and energy (two of the more volatile goods in the basket), core inflation increased at an annual rate of 4.6%, which is the highest gain since the summer of 1991. Never have I ever seen this level of inflation in my lifetime. Meanwhile, pricing for producers continues to remain elevated, up 8.6% in October, so we likely haven’t seen the end of pricing pressure…

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