- Global markets started off 2022 with some volatility. We saw global markets (represented by the MSCI All Country World Index) down -1.5% and domestic stocks (represented by the S&P 500 Index) down -1.8%.
- Last week’s release of minutes from the previous Federal Reserve meeting showed potential acceleration of interest rate increases, reducing their balance sheet, and concerns over inflation. In response, markets began to price in a faster pace of interest rate increases as bond yields rose. In response, the bond market (measure by the U.S. Aggregate Bond Index) was down -1.5% for the week.
- For perspective, the 10-year Treasury bond was yielding about 1.5% to end 2021. After the first week, that same bond was now yielding over 1.7%.
- Given those rising bond yields, it was no surprise that markets began to reprice themselves. With higher potential interest rates, longer-duration sectors underperformed in markets. For example, technology and healthcare were both down over 4% last week while financials (which benefit from higher rates) were up over 5%.
- In the December monthly jobs report, it was reported that unemployment dropped down to 3.9%. Previously, the November report showed a 4.2% unemployment rate.
- In the coming week, most attention will be focused on the December Consumer Price Index report. The report from the U.S. Bureau of Labor Statistics, which will be released on Wednesday, will give more perspective on the areas where price increases are seeing the most inflationary pressure.
- I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.
Financial planning and Investment advisory services offered through Diversified, LLC.
Diversified is a registered investment adviser, and the registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the SEC.
A copy of Diversified’s current written disclosure brochure which discusses, among other things, the firm’s business practices, services and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov.
Diversified, LLC does not provide tax advice and should not be relied upon for purposes of filing taxes, estimating tax liabilities or avoiding any tax or penalty imposed by law. The information provided by Diversified, LLC should not be a substitute for consulting a qualified tax advisor, accountant, or other professional concerning the application of tax law or an individual tax situation.
Nothing provided on this site constitutes tax advice. Individuals should seek the advice of their own tax advisor for specific information regarding tax consequences of investments. Investments in securities entail risk and are not suitable for all investors. This site is not a recommendation nor an offer to sell (or solicitation of an offer to buy) securities in the United States or in any other jurisdiction.