Mid-Week Market Minute 01.19.22

Market Updates

Global stocks have had a volatile start to the year, hurt by economic disruptions from Omicron, risks to company profits due to rising costs, ongoing inflation concerns, and worries about a more aggressive Federal Reserve. In the US, stocks were down sharply mid-week as investors now look forward to guidance from the first Federal Reserve meeting of 2022, which will be held Tuesday and Wednesday of next week (Jan 25-26). Fed officials have indicated that they will halt asset purchases by March 2022, which sets the stage for three or four short-term interest-rate hikes this year to help counter the threat of persistently higher inflation. Some are now predicting that the Fed may need to raise rates a full 50 basis points at their meeting in March to combat rising prices. The Fed will remain a key focus for investors in the near-term, as inflation remains top-of-mind for investors. In bonds, yields continue to move higher from the beginning of 2022. For reference, the 10-year Treasury yield began the year at a yield of 1.51%, and was trading at 1.84% mid-week after reaching a two-year high of 1.88% early in the week.  Oil prices continue higher,  with WTI crude up 2% to $87 a barrel on Wednesday, continuing to set multiyear highs and adding pressure to the prospect of higher inflation.

On a positive note, upbeat earnings this week from companies including Bank of America, Morgan Stanley, UnitedHealth,. and Procter & Gamble helped improve investor sentiment this week. In addition, housing starts for December 2021 rose 1.4% month-over-month  to an annual pace of 1.7 million units, above forecasts of 1.65 million units. Building permits, a key indicator for future construction,  jumped 9.1% to an annual rate of 1.9 million, well above expectations of 1.7 million units. Finally, on the political front, the next budget challenge comes next month, as a February 18 deadline looms for passing a budget. There were two temporary extensions late last year, and hopefully Congress will reach a longer-term budget solution and can revive stalled programs that may help provide further fiscal stimulus in 2022.

Source: GSAM, Bloomberg, JPM, AGF Investments

This communication is for informational purposes only. It is not intended as investment advice or an offer or solicitation for the purchase or sale of any financial instrument.

Indices are unmanaged, represent past performance, do not incur fees or expenses, and cannot be invested into directly. Past performance is no guarantee of future results.

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