A jump in yields sparked by a more aggressive sounding Federal Reserve sent the market lower to start the new year.
The Dow Jones Industrial Average fell 0.29%, while the Standard & Poor’s 500 declined 1.87%. The Nasdaq Composite index was hardest hit, dropping 4.53% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 0.55%.1,2,3
The Tech Wreck
The perception of a more hawkish Fed put a hard stop to the year’s positive start and pushed bond yields higher and stocks into a broad retreat.
Technology and other high-valuation shares were particularly hard hit by rising yields. Even the larger-capitalization technology companies with strong cash flows and profits were damaged. As yields trend higher, investors are questioning if these companies can lead the market in 2022. Fueling this decline was a four-day sell-off of technology companies by hedge funds that, in dollar terms, represented the highest level in more than ten years. Stocks continued to struggle into the final trading day, unsettled by a renewed climb in yields and an ambiguous employment report.4
The Fed’s Surprise
Minutes of December’s Federal Open Market Committee (FOMC) meeting were released last week and it revealed a more hawkish Fed than investors had been expecting. One surprise was that the first hike in interest rates could occur as early as March. Another, and perhaps more consequential, surprise was the idea of beginning a “balance sheet run-off” by the Fed following the first hike in the federal funds rate.5
A balance sheet run-off means that maturing bonds won’t be replaced with new bonds, the result of which is a smaller Fed balance sheet. Many investors view this step as removing liquidity from the system, a departure from market expectations that the balance sheet would remain flat during the Fed’s pivot to monetary normalization.
This Week: Key Economic Data
Wednesday: Consumer Price Index (CPI).
Thursday: Jobless Claims. Producer Price Index (PPI).
Friday: Retail Sales. Industrial Production. University of Michigan Consumer Sentiment Survey.
Source: Econoday, January 7, 2022
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
This Week: Companies Reporting Earnings
Wednesday: Infosys Limited (INFY).
Thursday: Delta Airlines, Inc. (DAL), Taiwan Semiconductor Manufacturing Company, Ltd. (TSM).
Friday: JPMorgan Chase & Co. (JPM), Citigroup, Inc. (C), Wells Fargo & Co. (WFC), BlackRock, Inc. (BLK).
Source: Zacks, January 7, 2022
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
WEALTH WATCH: STARTING OFF THE NEW YEAR WITH A VOLATILE MARKET
After closing out a very nice year the markets are off to a rocky start. The first couple of weeks of a new trading year seem to always be volatile, and with very little direction. This is primarily caused by fund managers, institutions, hedge funds, etc. readjusting their portfolios for the new year. It should calm down by month-end. I do expect the market to sell off a bit more before... [READ MORE] 6
This communication is issued by Howard Capital Management, Inc. It is for informational purposes and is not an official confirmation of terms. It is not guaranteed as to accuracy, nor is it a complete statement of the financial products or markets referred to. Opinions expressed are subject to change without notice.
Be on the Lookout for Tax Deduction Carryovers
Deductions or credits not used fully one tax year that may be eligible to be carried over into future years include:
- When you have a net operating loss
- When your total expenses for a permitted deduction exceed the amount you’re allowed to deduct in a given year
- When a credit you qualify for exceeds the amount of tax you owe in a year
- Adoption tax credits
- Foreign tax credits
- Credits for energy efficiency
Track these (or have your software do it) so that you don't forget them from one year to the next. 7
* This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Know Your Numbers
According to the American Heart Association, adults should know their key health numbers, including total cholesterol, HDL (good cholesterol), blood pressure, blood sugar, and body mass index. If you’re not sure what your “numbers” are, schedule a visit with your doctor to monitor them and understand why each is important. Here’s a quick definition of each metric:
- Cholesterol – Cholesterol is a lipoprotein in our body’s tissues that plays a role in forming and maintaining cell membranes.
- Body mass index – Your BMI is calculated using your height and weight, and can help determine whether you’re underweight, at a healthy weight, or overweight.
- Blood pressure – Blood pressure refers to the amount of force the heart must use to pump blood throughout the body.
- Blood sugar – Blood sugar measures the concentration of glucose in the blood. 8
Honey Pear Tart
Time: 1 hour
- 1 package (2 sheets) frozen puff pastry, thawed
- egg wash: 1 large egg beaten with 1 Tablespoon milk
- 8 ounces goat cheese
- 2 large pears, thinly sliced
- 2 Tablespoons coarse sugar (or brown sugar!)
- 1/4 cup sliced almonds
- sea salt for sprinkling
- honey for drizzling
- Preheat oven to 375°F (191°C). Line a 12×17 inch baking sheet with parchment paper or a silicone baking mat.
- Unroll the pastry sheets on a floured work surface. Place the edge of one over the other and use a rolling pin to adhere them together. Roll the whole thing out into a 10×14 inch rectangle. Fold over the edges and crimp down with a fork. Crimping is much easier the colder the pastry is, so place into the refrigerator to chill if needed.
- Brush the entire pastry, edges included, with egg wash. Top with goat cheese.
- Toss the pear slices and coarse sugar together. Line the pears on top of the pastry. Sprinkle with almonds and sea salt.
- Bake for 35-40 minutes until the edges are golden brown. Remove from the oven, place on a wire rack, and allow to cool for 10 minutes. Drizzle with honey before slicing and serving. 9
Footnotes and Sources
1. The Wall Street Journal, January 7, 2022
2. The Wall Street Journal, January 7, 2022
3. The Wall Street Journal, January 7, 2022
4. CNBC, January 6, 2022
5. The Wall Street Journal, January 5, 2022
6. howardcm.com, January 5, 2021
7. Credit Karma, December 9, 2020
8. American Heart Association, June 24, 2021
9. sallysbakingaddiction.com, November 4, 2016
Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG is not affiliated with the named representative, financial professional, Registered Investment Advisor, Broker-Dealer, nor state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.
Copyright 2022 FMG Suite.
McCarthy Financial Group's Blog: Market Insights & Wealth Watch