From the desk of Vance Howard:
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 we find a short-term bottom in all this slop. Investors should expect at least one 10% correction this year, and after three big years this should not a surprise.
Bonds will be a very difficult place to make money this year when the fed starts to raise rates. This gives stocks a brighter outlook. I had thought that rates would moderate a little at the beginning of 2022, as the economic growth rate slowed due to COVID and other factors. Not so, as yields across the spectrum have resumed their bull market rally in anticipation of higher inflation and a less accommodative central bank. Even the long end is beginning to come to life.
ADP private payrolls jumped 807,000 in December, the most in seven months, and above the consensus of 373,000. Payroll gains averaged 625,000 per month in Q4, exceeding the 386,000 averages in Q3, on the back of a subsiding Delta wave of Covid-19, and without much impact yet from the Omicron variant. But the latter continues to spread quickly and has already delayed some back-to-the-office plans, which could weigh on payroll’s growth in early 2022.
The hiring spree in December was dominated by service-providing industries, which added 669,000 to payrolls, the most in six months. The leaders in services were leisure/hospitality (+246,000), trade/transportation/utilities (+138,000), and professional/business services (+130,000). Goods-producing payrolls increased 138,000, the biggest gain since September 2020, with both construction and manufacturing adding the most jobs since at least Q3 2020.
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