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.
Volatility and Fear. In recent weeks, the stock market has decided the economic pain associated with an eventual tightening of fiscal and monetary policy is more likely to come sooner rather than later.
Riding the COVID Rollercoaster. In our opinion, it's not the new variant that is the problem, but the government's potential reaction to it.
Thankful, but Watchful...So for now, be thankful. We remain bullish on equities and the economy. A bear market or recession in 2022 is very unlikely. But don't be complacent. Be watchful and be ready to shift, as always, if circumstances change.
Inflation Returns. The M2 measure of the money supply is up almost 40% from where it was in February 2020, substantially faster than the pre-COVID trend. Ultimately, this is the root cause of the inflation we’re seeing.
Tuesday Results and the 2022 Economic Outlook. From a forecasting point of view, 2021 was simple. Solid economic growth, higher inflation, and a bull market in stocks have been our mantra all year along. As we focus on 2022, the Fed is still pumping money, interest rates remain low, and the economy continues to add back the jobs it lost during lockdowns. At the same time, election results show a backlash against bigger government. For 2022, we watch with cautious optimism.
Eyes on the Federal Reserve Investors will be focused on the Federal Reserve this week and our expectation is that it will finally announce an overdue tapering of quantitative easing.