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Weekly Economic Update: December 20th, 2021

December 20th, 2021

Weekly Market Update

In this week’s recap: Fed tightens monetary policy.

The Week on Wall Street

Stock prices retreated last week as global central banks joined the Federal Reserve is taking steps to tighten monetary policy.

The Dow Jones Industrial Average fell 1.68%, while the Standard & Poor’s 500 dropped 1.94%. The Nasdaq Composite index tumbled 2.95% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, managed a gain of 0.47%.^1,2,3

From Uncertain to Unsettled

Stocks weakened ahead of Wednesday’s Federal Open Market Committee (FOMC) meeting as investors weighed how aggressive the Fed might be in reversing its easy-money policies. Investor sentiment was further dented by disappointing economic data. Retail sales fell short of expectations and a year-over-year jump of 9.6% in producer prices reflected price pressures that may translate into higher future consumer prices. It was the highest percentage increase since records started in 2010.⁴

The market initially responded well to the FOMC announcement on Wednesday afternoon but became unsettled into Thursday and Friday over a tighter monetary policy and Omicron concerns.

A New Fed Narrative

After the FOMC meeting, the Fed announced a plan to quicken the tapering of its monthly bond purchases. It plans to double the rate from $15 billion a month (announced in November) to $30 billion a month, effectively putting an end to asset purchases by March 2022. The Fed also signaled that as many as three rate hikes may be coming in 2022.⁵

The Fed cited elevated inflation and an improved labor market as justification for the pivot from its pandemic-related, easy-money policies. Reflecting the persistence of higher-than-anticipated inflation, the Fed raised its previous inflation estimates for this year and 2022.⁶

Tip of the Week

Ward off impulse buying with a 30-day list. If you feel like you have to have something, put it on your 30-day list. See if you still have the urge to buy it after 30 days; chances are, you won’t.

Radio

Listen below for a segment of this past weekend's Retire Ready radio show as David Nicholas discussed the potential impact on future taxes with the increase in national debt hitting roughly $29 trillion dollars.

Be sure to tune in every Saturday on 95.5 FM WSB at 7 pm to hear David's thoughts.

[yotuwp type="videos" id="6x5uENUIyJg" ]

Media

Be sure to subscribe to our YouTube page for all of David’s media commentaries CLICK HERE!

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