Sticking to Our Targets, For Now...The bottom line is that the winds of change are blowing hard in 2022: COVID is winding down, borders are in flux, and monetary policy is in for a major and long-overdue shift. In spite of these changes, we think equities are likely to rebound from recent strife and work their way higher this year. The bull market in stocks won't last forever. But, for now, it isn't at an end.
Russia and Rate Hikes...The financial markets have been on tenterhooks lately for two main reasons: Russia and rate hikes.
Not All That...rarely have we seen an economic report as misinterpreted as Friday's jobs report.
Rate Hikes Finally on the Way. The best reason to implement a larger Quantitative Tightening is that the Fed needs to counteract the excessive growth in the M2 measure of the money supply that is the root cause of higher inflation.
The 2021 Finish: Fast Growth, High Inflation. At present, we estimate that real GDP grew at a 5.7% annual rate in the fourth quarter. If we're right, then real GDP grew 5.2% in 2021 (Q4/Q4), the fastest pace for any calendar year since the Reagan Boom in 1984.
Who Gets the Blame for Inflation?... politicians across the political spectrum are working overtime to find someone to blame and attack. What they're missing is that there is no consistent historical relationship between higher spending, larger deficits, and more inflation.
Job Market Making Progress...even as payrolls have recently fallen short, civilian employment, an alternative measure of jobs, has been rising fast, including a gain of 651,000 in December and an increase of 1.09 million in November.
Welcome to 2022: The Winds of Change. We can't imagine a more transformative year for America.
2022: Moderate GDP – Persistent Inflation...good growth versus historical measures but not yet enough to get us back to where we would have been if COVID had never happened.
We were bullish in 2021 and bullishness obviously paid off. Our year-end 2022 call for the S&P 500 is 5,250 (up 11.4% from last Friday), and we expect the Dow Jones Industrial Average to rise to 40,000.