Chief Economist Scott Brown discusses the latest market data.
Minutes of the December 14 to 15 Federal Open Market Committee (FOMC) meeting showed that Federal Reserve officials had entered an initial discussion of “policy normalization,” including an earlier liftoff in short-term interest rates and a potential runoff of the Fed’s balance sheet. Officials viewed the labor market as closer to full employment, while inflation risks were to the upside.
The December employment report was mixed. Nonfarm payrolls rose less than expected, but the unemployment rate fell to 3.9% (from 4.2% in November and 6.7% a year earlier). The ISM Manufacturing Index slowed to 58.7 in December (from 61.1 in November), while the ISM Services Index fell to 62.0 (from a record 69.1) – details of both reports were relatively strong and each reflected ongoing supply chain issues. A record 3.0% of workers (4.5 million) quit their jobs in November. Unit motor vehicle sales for December were down 21.0% from a year earlier, reflecting production issues.
Next week the focus is likely to be on Jerome Powell’s renomination hearing, where the Fed chair may have some explaining to do. We’ll get two important economic releases: the Consumer Price Index (CPI) and retail sales. The CPI should show inflation peaking (we hope). Gasoline prices fell a bit more than the seasonal adjustment would expect in December, but higher rents will show up with a lag. December retail sales may appear a little soft on a month-over-month basis, but the year-over-year gain should be strong.
Consumer Money Rates
|Last||1 year ago|
|Last||1 year ago|
|Dollars per British Pound||1.353||1.361|
|Dollars per Euro||1.129||1.232|
|Japanese Yen per Dollar||115.850||103.040|
|Canadian Dollars per Dollar||1.272||1.267|
|Mexican Peso per Dollar||20.506||19.649|
|Last||1 year ago|
|Last||1 month ago|
|10-year municipal (TEY)||1.75||1.62|
Treasury Yield Curve – 1/7/2022
As of close of business 1/6/2022
S&P Sector Performance (YTD) – 1/7/2022
|January 11||—||Powell renomination hearing|
|January 12||—||Consumer Price Index (December)|
|—||Fed Beige Book|
|January 13||—||Jobless Claims (week ending January 8)|
|—||Producer Price Index (December)|
|January 14||—||Retail Sales (December)|
|—||Industrial Production (December)|
|—||UM Consumer Sentiment (mid-January)|
|January 17||—||MLK Day (markets closed)|
|January 19||—||Building Permits, Housing Starts (December)|
|January 26||—||FOMC policy decision|
|January 27||—||Real GDP (4Q21, advance estimate)|
|January 28||—||Employment Cost Index (4Q22)|
|February 4||—||Employment Report (January)|
All expressions of opinion reflect the judgment of the author and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.
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Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business January 6, 2021.