Around this time of year, we like to produce our list of things for which investors should be thankful. We started this tradition in 2016 but sadly missed last year. This year we bring back the fun! It has been a year of extremes in many ways, but it has mainly been smooth sailing for investors, so there is much to celebrate.
- Thank you, Federal Reserve… your low Fed Funds rate and asset purchases continue to provide stimulus to a recovering economy (let’s hope you are not behind the curve).
- Thank you, Congress (no, really!)… your pandemic stimulus has led to record high personal savings driving up demand for…well… everything (we won’t mention inflation here).
- Thank you, robust and dynamic US economy… you have once again demonstrated that you know how to take a punch (sometimes several) and get right back up. Chumbawamba anyone?
- Thank you, vaccines… you not only helped us see more of our family and co-workers in 2021 but also gave investors a shot in the arm of confidence that this to will pass.
- Thank you, US equities… at some point, we know you have to go down, but we will always enjoy years when you are hitting all-time highs. Onward and upward!
- Thank you, TIPS… in a year not built for fixed income, you have provided some much-appreciated positive performance (should we thank inflation? Nah).
- Thank you, COLA… for investors receiving Social Security, your recent increase will put some extra cash in their pocket in 2022. Spend it wisely!
But most of all
- Thank you, clients of Strategic… for the continued trust and confidence you have placed in the entire Strategic team. We are thankful to have you as part of our community!
Headlines This Week
Stocks ended the week just slightly above flat. Despite the muted performance, it was a reasonably notable week for news flow and economic data.
Tuesday’s economic data provided evidence that rising inflation is not impacting consumer spending.
- Retail Sales data for October was released this week and were up 1.4% (ex-autos and fuel) versus expectations of a 0.8% increase. Despite the grumblings about the rising cost of goods, consumers continue to spend thanks to record levels of savings accumulated during the pandemic.
- Industrial production also came in ahead of expectations, providing a good sign that companies are seeing economic activity continue to pick up.
Building Back Momentum
Infrastructure was on the docket in Washington this week.
- The President signed the $1T infrastructure bill on Monday. This is not a direct fiscal stimulus, but it is stimulative and could spur continued economic growth. The bill includes $550B in new money to go towards transportation, broadband, and utilities.
- On Friday, the House signed the $1.75T Build Back Better social spending package. The passage in the Senate will face challenges, and we will likely see meaningful amendments before the pen is put to paper.
The Week Ahead
Looking for Details
The Federal Market Open Committee (FOMC) minutes will be out on Wednesday, with many looking for information on the Federal Reserve’s path forward.
- Statements by Fed officials have already provided much insight. However, investors will still be digging through the FOMC minutes from earlier this month in an attempt to glean any additional information.
- The Federal Reserve announced it would start tapering its monthly asset-purchase program of $120 billion by $15 billion every month during the November meeting.
- As inflation continues to grow, any hawkish comments that suggest an increased pace of tapering will be watched and scrutinized closely.
Markit’s purchasing managers indices (PMI) for several key countries are out on Tuesday.
- This forward-looking estimate of a countries manufacturing and service industries can give the market an idea of where the economy is heading.
- While the Eurozone’s and the UK’s numbers are expected to dip slightly, America’s numbers keep growing, signifying the divergent economic recovery between the two regions.
Data Stuffed Wednesday
Next week’s busy day will come in the middle of the week when several vital US economic metrics are set for release.
- The primary data points to look at on Wednesday will be durable goods orders, personal consumption expenditures (PCE), the Michigan consumer sentiment index, and the second estimate of third-quarter GDP.
- PCE tends to be the Fed’s favorite inflation measure and is expected to continue growing as October’s core reading estimates are at 4.1%, up from September’s 3.6%.
- If correct, that would put the core measure at a level last seen in 1990.
Here at Strategic, we would like to wish everyone a Happy Thanksgiving!
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