Markets “In a Nutshell” for December 13, 2021
Investment Week at a Glance
Stocks finished higher for the week. The Dow Jones Industrial Average rose 4.00%, the S&P 500 was up 3.80%, and the NASDAQ rose 3.60%. Foreign stocks (MSCI EAFE) were also up, rising 2.70%. Bond prices were lower for the week, with the 10-year U.S. Treasury ending the week at 1.48%. (Data source: Wall Street Journal)
Last week the November CPI number was released and we are now at 6.8% year over year which is the highest we have seen since 1982. Although this number is very high, it was expected so the market did not have much reaction to the data. With unemployment now, at 4.2% the Fed is expected to shift its focus from employment to dealing with inflation. Powell has also said the term transitory should be retired as inflation now appears to be more persistent. Powell has also said it may make sense for the Fed to accelerate their taper process by a few months to help slow inflation. The market will pay close attention this week as it expects Powell to announce a faster taper.
The Fed will hold its 2-day meeting on Tuesday and Wednesday this week and the market will be watching as there are many headlines expected from this meeting. It is expected that they will announce a quicker taper but there is also some speculation that they will signal an increase in interest rates in 2022. The Fed is also expected to discuss the Omicron variant and its impact on the economy going forward. It seems as of now that the new variant is not as bad as thought of at first and should be good news for the economy and market moving forward. If the Fed were to bring up any new worries expect market volatility to continue as it has. However, the Fed has made sure to be transparent of recent and not send any news that will cause markets to react drastically.
How much is the Fed currently buying in government backed bonds each month? (Scroll Down for Answer)
Have a Great Week!
C) $120 Billion, The Federal Reserve is currently buying $80 billion in Treasury Debt and $40 billion in mortgage backed securities each month.