Chief Economist Scott Brown discusses the latest market data.
In his renomination hearing, Fed Chair Jerome Powell stressed that the key to maximum sustainable employment and financial stability was keeping inflation low. However, he didn’t appear as hawkish as financial market participants had feared.
The Fed’s Beige Book noted that economic growth expanded at “a modest pace” in the final week of 2021. However, demand for materials and labor “remained elevated.” Omicron led to “a sudden pullback in leisure travel, hotel occupancy and patronage at restaurants.” Contacts reported “solid growth in prices charged to customers, but some also noted that price increases had decelerated a bit from the robust pace experienced in recent months.”
The Consumer Price Index (CPI) rose 7.0% in 2021. The largest increase in nearly 40 years. Ex-food and energy, the CPI rose 5.5% y/y. The monthly increase was led by higher prices of new and used motor vehicles. Shelter costs are trending higher. Retail sales fell 1.9% in December (+16.9% y/y), down 2.3% ex-autos (+17.0% y/y). The drop likely reflects earlier holiday shopping, an omicron impact and reduced purchasing power for the average consumer. Industrial production slipped 0.1% in December (+3.7% y/y), held back by a 1.3% decline in motor vehicle output (-5.9% y/y).
Next week: The economic calendar is thin. December is not a critical month for housing. The drop in jobless claims will lead the LEI higher.
|Last||Last Week||YTD return %|
Consumer Money Rates
|Last||1 year ago|
|Last||1 year ago|
|Dollars per British Pound||1.360||1.373|
|Dollars per Euro||1.131||1.216|
|Japanese Yen per Dollar||114.110||103.500|
|Canadian Dollars per Dollar||1.250||1.264|
|Mexican Peso per Dollar||20.536||19.731|
|Last||1 year ago|
|Last||1 month ago|
|10-year municipal (TEY)||2.02||1.66|
Treasury Yield Curve – 1/28/2022
As of close of business 1/27/2022
S&P Sector Performance (YTD) – 1/28/2022
|January 31||—||Chicago Business Barometer (January)|
|February 1||—||ISM Manufacturing Index (January)|
|—||JOLTS data (December)|
|—||ADP Payroll Estimate (January)|
|February 3||—||Jobless Claims (week ending January 29)|
|—||ISM Services Index (January)|
|February 4||—||Employment Report (January)|
|February 10||—||Consumer Price Index (January)|
|February 16||—||Retail Sales (January)|
|—||Industrial Production (January)|
|March 16||—||FOMC policy decision|
|—||FOMC policy decision|
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.
The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks. An investment cannot be made directly in these indexes. The performance noted does not include fees or charges, which would reduce an investor’s returns. U.S. government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.
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 127, 2022.
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