In this week’s recap: Hawkish Fed sees bonds higher and stocks retreat.






THE WEEK ON WALL STREET
A jump in yields sparked by a more aggressive sounding Federal Reserve sent the market lower to start the new year.  
The Dow Jones Industrial Average fell 0.29%, while the Standard & Poor’s 500 declined 1.87%. The Nasdaq Composite index was hardest hit, dropping 4.53% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 0.55%.1,2,3

THE TECH WRECK
The perception of a more hawkish Fed put a hard stop to the year’s positive start and pushed bond yields higher and stocks into a broad retreat.
Technology and other high-valuation shares were particularly hard hit by rising yields. Even the larger-capitalization technology companies with strong cash flows and profits were damaged. As yields trend higher, investors are questioning if these companies can lead the market in 2022. Fueling this decline was a four-day sell-off of technology companies by hedge funds that, in dollar terms, represented the highest level in more than ten years. Stocks continued to struggle into the final trading day, unsettled by a renewed climb in yields and an ambiguous employment report.4
 
THE FED’S SURPRISE
Minutes of December’s Federal Open Market Committee (FOMC) meeting were released last week and it revealed a more hawkish Fed than investors had been expecting. One surprise was that the first hike in interest rates could occur as early as March. Another, and perhaps more consequential, surprise was the idea of beginning a “balance sheet run-off” by the Fed following the first hike in the federal funds rate.5
A balance sheet run-off means that maturing bonds won’t be replaced with new bonds, the result of which is a smaller Fed balance sheet. Many investors view this step as removing liquidity from the system, a departure from market expectations that the balance sheet would remain flat during the Fed’s pivot to monetary normalization.
Assets- Basically, anything you own, including your home and other real estate, bank accounts, life insurance, investments, furniture, jewelry, art, clothing, collectibles, etc.

Hello,

A confident consumer can be a powerful ally in an economy. But when the consumer starts to have questions, we can measure consumer confidence in everything from retail sales to home buying to the personal savings rate.
 
In recent months, consumer confidence has been falling as inflation expectations have been rising. So, if inflation slows, does that mean the consumer will regain confidence? It’s possible, but other factors can influence consumer confidence, including perceptions of COVID-19.1,2
 
When the consumer does regain confidence, we may expect it to be a powerful force driving economic growth. Many may base the 2022 U.S. economic outlooks on a rebound in consumer confidence, leading to increased spending.3
 
In some ways, the only consumer confidence that matters is yours. Are you optimistic about 2022, or do you have concerns or doubts that are holding you back? We look forward to hearing from you. The beginning of the year is a great time to set up a review of your finances to ensure you are on track to crush your fiscal goals.  
 
Let’s arrange a time to meet in this new year. Reach me at 800-871-1219 or Fsykes@scarletoakfs.com. Hit the Meet with Faye button if you want to schedule an appointment.


Letter citation below
Thanks,
Faye Sykes
CEO, Independent Wealth Manager, CLTC & NSSA
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THE WEEK AHEAD: KEY ECONOMIC DATA

Wednesday: Consumer Price Index (CPI).

Thursday: Jobless Claims. Producer Price Index (PPI).

Friday: Retail Sales. Industrial Production. University of Michigan Consumer Sentiment Survey.
Source: Econoday, January 7, 2022
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
 
THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Wednesday: Infosys Limited (INFY)

Thursday: Delta Airlines, Inc. (DAL), Taiwan Semiconductor Manufacturing Company, Ltd. (TSM)

Friday: JPMorgan Chase & Co. (JPM), Citigroup, Inc. (C), Wells Fargo & Co. (WFC), BlackRock, Inc. (BLK).
Source: Zacks, January 7, 2022
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
The first month of the year can be a good time to review and/or rebalance your portfolio, to see that your investments are in sync with your objectives.
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Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.
U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.
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This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG is not affiliated with the named representative, financial professional, Registered Investment Advisor, Broker-Dealer, nor state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.
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CITATIONS:
1. The Wall Street Journal, January 7, 2022
2. The Wall Street Journal, January 7, 2022
3. The Wall Street Journal, January 7, 2022
4. CNBC, January 6, 2022
5. The Wall Street Journal, January 5, 2022


Letter Citation
This material was prepared by MarketingPro, Inc. for use by Scarlet Oak Financial Services.
The forecasts or forward-looking statements about the 2022 economy are based on assumptions, subject to revision without notice, and may not materialize.
   
Citations
1. SCA.ISR.UMich.edu, November 2021
2. Conference.Board.org, November 2021
3. MorganStanley.com, November 22, 2021
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