​Here’s a little story about a group called the Fed…

In the 1950’s, then Fed Chair William McChesney Martin described the Federal Reserve as “the chaperone who has ordered the punch bowl removed just when the party was really warming up.”

In 2020, the opposite was true. The Fed, along with fiscal policymakers, filled the stimulus punch bowl to the brim to keep the country from falling into a recession or depression. In November 2021, Fed Vice Chair Richard Clarida explained:

“The COVID-19 pandemic and the mitigation efforts put in place to contain it delivered the most severe blow to the U.S. and global economies since the Great Depression. Gross domestic product (GDP) collapsed at a nearly 33 percent annual rate in the second quarter of 2020. More than 22 million jobs were lost in just the first two months of the crisis, and the unemployment rate rose from a 50-year low of 3.5 percent in February to a postwar peak of almost 15 percent in April 2020…The fiscal and monetary policy response in the United States to the COVID crisis was unprecedented in its scale, scope, and speed.”

That stimulus helped the economy recover quickly. As a result, demand for goods rose and exceeded supply, pushing prices higher. The Fed did not act immediately to tame inflation because its members believed price increases would subside as supply chain issues eased. Then, in November, inflation was 6.8 percent year-over-year, as measured by the Consumer Price Index. The cost of shelter, which typically is not transitory, was up more than 3 percent year-over-year.

In December, the Fed adjusted its outlook on inflation, removing the word “transitory,” and accelerated the pace at which it would reduce monetary stimulus (i.e., remove the punchbowl). Fed Chair Jerome Powell explained, “…in light of the strengthening labor market and elevated inflation pressures, we decided to speed up the reductions in our asset purchases. As I will explain, economic developments and changes in the outlook warrant this evolution of monetary policy, which will continue to provide appropriate support for the economy.”

Major United States stock indices dropped lower after Powell’s remarks before climbing to new highs in December.

Last Wednesday, the minutes of the Fed’s December meeting were released. Investors appeared to be surprised by the changes in the Fed’s change in tone, reported Ben Levisohn of Barron’s. Share prices tumbled again and the yield on 10-year Treasury notes moved higher.

It all depends on who you ask…Last week’s unemployment report illustrated, once again, a remarkable divergence in the messages delivered by the data. Here is what we learned:

·         The U.S. added 199,000 jobs. When the Bureau of Labor Statistics (BLS) calculates the number of jobs added to the U.S. economy each month, its data come from an employer survey.

Last week’s report showed that 199,000 jobs were created in December. That was a lot lower than expected. Dow Jones estimated 422,000 new jobs would be created, according to Jeff Cox of CNBC. The low employment number suggests U.S. economic growth may be slowing, reported Colby Smith, Andrew Edgecliffe-Johnson and Christine Zhang of Financial Times.

Of course, the number of jobs created in December may be revised higher over the next two months. Last year, “…revisions from the first estimate to the third and final release…added nearly 1 million jobs to the initial releases – 976,000 to be exact, through October,” reported CNBC. That was the highest upward adjustment ever in a single year, according to Financial Times.

·         The unemployment rate fell to 3.9 percent. When the BLS calculates the unemployment rate, its data come from a household survey.

 In December, that survey showed the unemployment rate fell to 3.9 percent overall. Unemployment rates varied by race: 3.2 percent for white people, 7.1 percent for Black people, 3.8 percent for Asian people, and 4.9 percent for Hispanic people. The low overall unemployment rate suggests the economy is experiencing strong growth.

 Rising wages and record numbers of job openings also indicate economic strength. Average hourly earnings for U.S. workers rose 4.7 percent in 2021, and there were 10.6 million job openings in November, according to last week’s BLS Job Openings and Labor Turnover report. The report indicated that 6.7 million people were hired and 6.3 million left their employers.

Why is the unemployment data wonky? An expert cited by Financial Times reported, “The economic fundamentals have been shifting at unprecedented speed. Not in my lifetime and not in the lifetime of most people alive today have we seen…an economic recovery that has been as rapid as it has been since the spring of 2020…The challenges of economic measurement in a pandemic environment are enormous.”

Weekly Focus – Think About It

“Facts are stubborn things, but statistics are pliable.”
—Mark Twain, writer

Investment advice offered through Research Financial Strategies, a registered investment advisor.
* This newsletter and commentary expressed should not be construed as investment advice.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

Investment advice offered through Research Financial Strategies, a registered investment advisor.

Sources:
https://fraser.stlouisfed.org/title/statements-speeches-william-mcchesney-martin-jr-448/address-new-york-group-investment-bankers-association-america-7800
https://www.federalreserve.gov/newsevents/speech/clarida20211130a.htm
https://www.cnbc.com/2021/09/29/fed-chair-powell-calls-inflation-frustrating-and-sees-it-running-into-next-year.html
https://www.bls.gov/news.release/cpi.nr0.htm
https://www.bls.gov/news.release/cpi.t01.htm
https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20211215.pdf
https://www.reuters.com/markets/europe/indexes-mixed-wall-street-heads-weekly-loss-2021-12-17/
https://www.cnbc.com/2021/12/30/stock-market-futures-open-to-close-news.html
https://www.barrons.com/articles/stock-market-tech-stocks-federal-reserve-51641603791?refsec=the-trader (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/01-10-22_Barrons_The%20Feds%20Hawkish%20Turn%20Clobbered%20Your%20Favorite%20Stocks_9.pdf)
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
https://www.bls.gov/news.release/empsit.nr0.htm
https://www.bls.gov/bls/empsitquickguide.htm
https://www.cnbc.com/2022/01/07/hiring-falters-in-december-as-payrolls-rise-only-199000.html
https://www.ft.com/content/73c26e1b-ebf6-4dd4-9930-132c01db6929 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/01-10-22_Financial%20Times_Hottest%20Its%20Ever%20Been_14.pdf)
https://www.cnbc.com/2021/12/03/nearly-1-million-more-jobs-were-created-this-year-than-the-government-first-estimated.html
https://www.ft.com/content/4f1155be-1a5f-4fd2-ba57-b15bdb273c00 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/01-10-22_Financial%20Times_US%20Struggles%20to%20Measure%20Jobs%20Growth%20as%20Pandemic%20Distorts%20Labour%20Market%20Data_16.pdf)
https://www.bls.gov/news.release/jolts.nr0.htm
https://www.goodreads.com/quotes/tag/statistics

2021 was a fizzing mints-in-soda kind of year.

Everything seemed to shoot higher – from COVID-19 cases and vaccinations to economic growth and global stock markets. Everything except for optimism. As the year came to an end, a CBS News poll found that 40 percent of Americans felt 2021 was mostly filled with sadness, although almost three out of four people polled said they were hopeful for 2022.

As we head into the new year, let’s a look back at 2021.

·         Vaccinations took off. At the start of the year, very few people were vaccinated against COVID-19. Despite issues with vaccine reluctance and availability, by the end of the year more than 58 percent of the world’s population had received at least one dose of a COVID-19 vaccine.

 United Arab Emirates led the way with 99 percent of the nation’s population vaccinated. Nigeria lagged with about 95 percent of the population unvaccinated. More than 61 percent of Americans were fully vaccinated, and another 12 percent were partially vaccinated, according to Our World in Data.

·         United States’ economic growth was stronger than it has been in decades. In December, The Conference Board estimated the U.S. economy grew by 6.5 percent annualized in the fourth quarter of 2021, and 5.6 percent over the full year. That’s the strongest growth in decades, according to Ben Levisohn of Barron’s. The publication reported the lesson of the last century is, “Don’t underestimate the resilience of the U.S. economy.”

 ·         Inflation rose faster than it has in decades. Consumer prices increased at the fastest pace since 1982. By December, prices were up almost 7 percent for the year in the U.S., according to The Economist. As rents and wages increased, the Federal Reserve changed the language it used when discussing inflation, removing the word “transitory.” Some economists say inflation will subside in 2022, while others believe it will be more enduring, according to a report from Goldman Sachs.

·         Consumer sentiment declined and then rose in December. Overall, consumers were less optimistic during 2021, largely because of inflation. About 25 percent of households said inflation was eroding their standard of living.

In December, however, optimism moved sharply higher “…primarily due to significant gains among households with incomes in the bottom third of the distribution. Indeed, the bottom third expected their incomes to rise during the year ahead by 2.8%, up from 1.8% last December,” reported Richard Curtin, the University of Michigan’s Surveys of Consumers chief economist. That’s the biggest gain in 22 years.

·         The Federal Reserve took a hawkish turn. As inflation persisted, the Fed decided to accelerate monetary policy tightening by tapering bond purchases more quickly than expected. In December, 12 of the 18 Federal Open Market Committee members indicated they anticipate at least three rate hikes in 2022. The increases would lift the Fed funds rate from zero to 0.25 percent to 0.75 to 1.0 percent.

·         Major U.S. stock indices set record after record. After trading closed on December 31, 2021, “All three major U.S. stock indexes scored monthly, quarterly and annual gains, notching their biggest three-year advance since 1999,” reported Stephen Culp and Echo Wang of Reuters.

·         Corporate earnings proved resilient. Despite supply chain issues, labor shortages, wage increases and inflation, U.S. company earnings were exceptional. Earnings, which reflect company profits, were up 45.1 percent year-over-year. That’s well above the trailing 10-year average annual earnings growth rate of 5.0 percent, according to John Butters of FactSet.
 
·          China cracked down on “capitalist excesses.” “More than $1trn was wiped off the collective market capitalization of some of the world’s largest internet groups…Entire business models – online tutoring, for example – were laid waste. Investors needed to hear that an end was in sight. But on August 8th the Communist Party issued a five-year blueprint aimed at reshaping China’s tech industry – confirming to even the most optimistic industry watchers that the abrasive changes would continue well into 2022,” explained The Economist.

 ·         Finding income in the bond market was challenging. “Emerging-market bonds were supposed to be dragged down this year as central banks moved toward withdrawing stimulus. Instead, the best-performing global debt was all from developing nations…South Africa, China, Indonesia, India and Croatia topped the rankings of 46 markets around the world in 2021,” reported Lilian Karunungan and Masaki Kondo of Bloomberg.

The latest fashion: Resale and Reuse…If there was a spectrum that reflected the value and longevity of everything we owned, consumables (coffee and cell phones) might be at one end, durables (automobiles and appliances) in the middle, and items with enduring value (homes and collectibles) on the other end, according to The Economist.

Clothing might belong on different parts of the spectrum. Everyday socks might be on one end while Audrey Hepburn’s little black dress from Breakfast at Tiffany’s and Neil Armstrong’s Apollo 11 spacesuit ranged toward the other end.

Currently, people spend less on clothes, overall, but buy more than they once did. Often, items are worn a few times and then discarded. As a result, the fashion industry has a sustainability problem. The Economist reported:

“…industry studies reckon that clothing manufacture and distribution account for between 2% and 8% of global carbon emissions. The fashion industry probably emits more carbon than aviation (3% of emissions) or shipping (2%).”

With consumers prioritizing sustainability, fashion has begun to change. More people are cleaning out their closets and selling clothing online, according to the 2021 Resale Report. As a result, the resale clothing marketplace is expected to double, reaching $77 billion, during the next five years.

That may be the tip of the iceberg. Thirty-six billion pieces of clothing are thrown out by Americans each year, and estimates suggest that 95 percent could be recycled or reused.

Weekly Focus – Think About It

“Hope
Smiles from the threshold of the year to come,
Whispering ‘it will be happier’…”
—Alfred Lord Tennyson, poet

It has been an honor to work with you during 2021. We look forward to seeing you in the new year!

Investment advice offered through Research Financial Strategies, a registered investment advisor.
* This newsletter and commentary expressed should not be construed as investment advice.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

Investment advice offered through Research Financial Strategies, a registered investment advisor.

Sources:
https://www.cbsnews.com/news/americans-opinion-poll-on-2021-2022/
https://ourworldindata.org/covid-vaccinations
https://www.conference-board.org/research/us-forecast
https://www.barrons.com/articles/stock-market-2021-51640910494?refsec=up-and-down-wall-street (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/01-03-22_Barrons_The%20Stock%20Market%20Had%20a%20Wonderful%20year.%20Too%20Bad%20No%20One%20Enjoyed%20It_4.pdf)
https://www.barrons.com/articles/us-economy-stock-market-history-51640204442 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/01-03-22_Barrons_Lesson%20of%20the%20Century%20Dont%20Underestimate%20the%20Resilience%20of%20the%20U.S.%20Economy_5.pdf)
https://www.economist.com/finance-and-economics/2021/12/18/after-a-shocker-in-2021-where-might-inflation-go-in-2022 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/01-03-22_The%20Economist_After%20a%20Shocker%20in%202021%20Where%20Might%20Inflation%20Go%20in%202022_6.pdf)
https://www.federalreserve.gov/newsevents/pressreleases/monetary20211215a.htm
https://www.goldmansachs.com/insights/pages/gs-research/inflation-here-today-gone-tomorrow/inflation-here-today-gone-tomorrow.pdf
http://www.sca.isr.umich.edu (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/01-03-22_Survey%20of%20Consumers%20Final%20Results%20for%20December%202021_9.pdf)
https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20211215.pdf
https://www.reuters.com/markets/europe/wall-street-ends-tumultuous-year-near-record-highs-2021-12-31/
https://www.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_121721A.pdf (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/01-03-22_The%20Economist_Xi%20Jinpings%20Crackdown%20on%20Chinese%20Tech%20Firms%20Will%20Continue_13.pdf)
https://www.economist.com/the-world-ahead/2021/11/08/xi-jinpings-crackdown-on-chinese-tech-firms-will-continue
https://www.bloomberg.com/news/articles/2021-12-26/global-bond-winners-for-2021-all-came-from-emerging-markets (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/01-03-22_Bloomberg_Global%20Bond%20Winners%20for%202021%20All%20Came%20from%20Emerging%20Markets_14.pdf)
https://www.economist.com/christmas-specials/2021/12/18/fashion-as-an-asset-class (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/01-03-22_The%20Economist_Fashion%20as%20an%20Asset%20Class_15.pdf)
https://www.thredup.com/resale/#size-and-impact
https://www.goodreads.com/quotes/tag/new-year

Investors were feeling bullish.

Last week, the Standard & Poor’s 500 (S&P 500) Index closed at a record high for the 68^th time this year. That’s the second-highest number of record closes in a single year. The highest number occurred during 1995, when the S&P 500 had 77 record highs, reported Reuters. That was the year the Dow Jones Industrial Average passed 4,000 for the first time and then rose above 5,000, reported Wayne Duggan of Benzinga.

“The market deserves to celebrate. [COVID] brought death and dislocation, but we tend to pay too little heed to what didn’t happen. If vaccines hadn’t changed the pandemic’s trajectory, the U.S. would have suffered nearly 1.1 million additional deaths and 10 million more hospitalizations – according to an epidemiological model by the Commonwealth Fund cited this past week in the Journal of the American Medical Association,” reported Bill Alpert of Barron’s.

That may be the case, but investors were likely focused on expectations for consumer sentiment, economic growth and corporate earnings.

The Conference Board reported that the consumer outlook for income, business and labor market conditions improved significantly in December, rising from 90.2 to 96.9. A growing share of survey respondents plan to buy houses, cars and major appliances during the next six months. The number of people planning vacations increased, too, reported Lucia Mutikani of Reuters.

Consumer optimism could bode well for economic growth, which was robust in 2021, up 6.3 percent in the first quarter of the year, 6.7 percent in the second quarter, and 2.3 percent in the third quarter. The U.S. Bureau of Economic Analysis reported, “From the second quarter to the third quarter, spending for goods turned down (led by motor vehicles and parts) and services decelerated (led by food services and accommodations).”

Despite the July to September slowdown in GDP, corporate earnings remained unusually strong. Earnings are a measure of companies’ profitability, Analysts estimated that the corporate earnings growth rate for 2021 is 45.1 percent, year-over-year. That’s well above the trailing 10-year average annual earnings growth rate of 5 percent, reported John Butters of FactSet.

All sectors of the S&P 500 Index are expected to have had positive year-over-year earnings growth in 2021. Energy, Industrials, Materials, Consumer Discretionary and Financials sectors have experienced the strongest growth.

We hope the new year is filled with good health and prosperity.

Beeple, the ever given and billionaires in space…If you had to describe 2021 with a single word, what would you choose? Innovative? Frustrating? Too much? Something saltier? It certainly wasn’t an easy year but, in many ways, it was better than the preceding one. As we say goodbye to 2021, let’s not forget:

• Beauty is in the eye of the beholder. Non-fungible tokenswere among the manias that gripped the global community during 2021. Consider the case of Beeple, a digital artist from Wisconsin who is also known as Mike Winkelmann. Before 2021, the highest price commanded by a Beeple print was $100, reported Jacob Kastrenakes of The Verge. Then his collage, The First 5000 Days, became the first digital artwork offered for sale by a prestigious auction house. It sold for more than $69 million.

Commenting on a picture in the collage, the visionary digital artist said, “It’s a picture of my Uncle Jim, who I nicknamed Uber Jay. I probably would have spent more time on this, had I known it would eventually be part of a piece auctioned by Christie’s!”

• Misadventures of theEver Given. Global trade was disrupted last March when one of the world’s largest cargo ships became wedged in the Suez Canal, blocking all of the ships trying to access the canal for six days. After it was freed, the ship was impounded for three months while reparations were negotiated, reported the BBC.

 Its predicament briefly transformed international shipping into a spectator sport. Azmi Haroun of The Insider reported, “Social media users were quick to find deeper meaning in the ‘Big Engine That Couldn’t.’”

• Billionaires in Space. Jeff Bezos and Richard Branson journeyed into space along with various guests, courtesy of their respective space programs. Elon Musk’s private spaceflight company shuttled NASA astronauts to the International Space Station (ISS). Japanese entrepreneur (and former drummer in a punk rock band) Yusaku Maezawa become the first billionaire on the ISS. He journeyed by Russian rocket, reported the BBC.

 In 2016, Musk explained his focus on space travel. “History is going to bifurcate along two directions. One path is we stay on Earth forever, and then there will be some eventual extinction event…The alternative is to become a spacefaring civilization and a multi-planet species, which I hope you would agree is the right way to go.”

By the way, Dictionary.com chose ‘Allyship’ as its word of the year. The Oxford Languages chose ‘Vax,’ and Australia’s Macquarie Dictionary chose ‘Strollout’ (in recognition of the country’s slow vaccine rollout).

Weekly Focus – Think About It

“Be at war with your vices, at peace with your neighbors, and let every new year find you a better [person].”
—Benjamin Franklin, writer

Investment advice offered through Research Financial Strategies, a registered investment advisor.
* This newsletter and commentary expressed should not be construed as investment advice.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

Investment advice offered through Research Financial Strategies, a registered investment advisor.

Sources:
https://www.reuters.com/markets/asia/live-markets-sp-500-puts-another-record-high-close-under-tree-2021-12-23/ (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/12-27-21_Reuters_Live%20Markets%20S&P%20500%20Puts%20Another%20Record-High%20Close%20Under%20the%20Tree_1.pdf)
https://www.benzinga.com/etfs/broad-u-s-equity-etfs/21/02/11251625/this-day-in-market-history-dow-hits-4-000
https://www.barrons.com/articles/stock-market-sp-500-record-omicron-51640309982?refsec=the-trader (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/12-27-21_Barrons_Omicron%20Who_3.pdf)
https://www.conference-board.org/topics/consumer-confidence
https://www.reuters.com/markets/us/us-third-quarter-economic-growth-revised-slightly-higher-2021-12-22/ (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/12-27-21_Reuters_U.S.%20Consumer%20Confidence%20Perks%20Up_5.pdf)
https://www.bea.gov/sites/default/files/2021-12/gdp3q21_3rd.pdf
https://insight.factset.com/factsets-2021-year-in-review (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/12-27-21_Reuters_U.S.%20Consumer%20Confidence%20Perks%20Up_5.pdf)
https://www.theverge.com/2021/3/11/22325054/beeple-christies-nft-sale-cost-everydays-69-million
https://www.christies.com/features/Monumental-collage-by-Beeple-is-first-purely-digital-artwork-NFT-to-come-to-auction-11510-7.aspx
https://www.bbc.com/news/world-middle-east-58288512
https://www.insider.com/best-memes-ever-given-suez-canal-logjam-2021-3
https://www.bbc.com/news/world-asia-59544223
https://www.bbc.com/news/science-environment-52840482
https://www.bbc.com/news/science-environment-55564448
https://www.dictionary.com/e/word-of-the-year/
https://languages.oup.com/word-of-the-year/2021/
https://www.macquariedictionary.com.au/resources/view/word/of/the/year/
https://www.brainyquote.com/quotes/benjamin_franklin_141046

Inflation met expectations.

When the Bureau of Labor Statistics released the Consumer Price Index (CPI) last week, it showed that inflation was at levels last seen in 1982. In November, prices were up 0.8 percent month-to-month and 6.8 percent year-to-year.

“It was the blowout, superhot inflation number that everyone was expecting—and it was met with a shrug,” reported Ben Levisohn of Barron’s. “The major indexes, for their part, rose a touch on Friday to finish what turned out to be a fantastic week: The S&P 500 gained 3.8% to hit a new high, while the Dow Jones Industrial Average rose 4.0% and the Nasdaq Composite gained 3.6%.”

The bond market’s response to the CPI was unexpected, as well. “Indeed, Treasury inflation-protected securities were saying price pressures in future years will be abating instead of getting worse,” reported Randall W. Forsyth of Barron’s.

Forsyth was referring to the breakeven rate, which is the difference in the yields of Treasuries and the yields of inflation-protected Treasuries with the same maturities. The breakeven rate is a measure of investors’ inflation expectations for the next five years. On Friday, the 5-year Breakeven Inflation Rate was 2.76 percent. That was below its November high of 3.17 percent.

The financial markets’ tepid response to the CPI sparked debate about whether inflation has peaked.

No matter which side of the argument you come down on, “The surge in inflation since the start of 2021 means that it is guaranteed to remain elevated in annual terms for a while to come. A relatively optimistic forecast would have inflation returning to its pre-pandemic norm only at the very end of 2022,” reported The Economist.

The Consumer Sentiment Index was up (+4.5 percent) month-to-month, although it remained down year-to-year (-12.8 percent). Respondents were feeling a bit more positive about current economic conditions (+1.4 percent) and significantly more cheerful about the future (+6.8 percent) than they were in November.Sentiment round-up…The University of Michigan’s Index of Consumer Sentiment showed an increase in optimism in early December – and it had nothing to do with the Michigan Wolverines winning the Big 10 Championship for the first time in 17 years.

When respondents were asked whether inflation or unemployment was a more serious problem in the United States, 76 percent chose inflation, 21 percent said unemployment, and the remainder couldn’t decide or thought both were problems.

AAII Investor Sentiment Survey showed that bullishness crept higher last week, but a larger percentage of investors are feeling bearish (30.5 percent) than bullish (29.7 percent). Almost 40 percent of those surveyed were neutral, meaning they were uncertain whether the stock market would move higher or lower over the next six months.

Some say this survey is a strong contrarian indicator, meaning the stock market may do the opposite of what survey respondents think will happen. In other words, if respondents were strongly bullish, the market might be expected to move lower over the next six months, and vice versa. The strong neutral reading indicates investors don’t know what to expect.

TIM Group Market Sentiment Survey reflects the real-time advice that investment bankers, corporate financial advisors, and other sell-side firms are providing to clients.¹⁰ Last week, survey respondents took a turn to the bearish. The survey’s sentiment reading was 43 percent, down from 46.8 percent two weeks ago. (A reading of zero is completely bearish and a reading of 100 is completely bullish.)

What do you expect during the next six months?

Weekly Focus – Think About It

“The only function of economic forecasting is to make astrology look respectable.”
—John Kenneth Galbraith, economist

Investment advice offered through Research Financial Strategies, a registered investment advisor.
* This newsletter and commentary expressed should not be construed as investment advice.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

Investment advice offered through Research Financial Strategies, a registered investment advisor.

Sources:
https://www.bls.gov/news.release/cpi.nr0.htm
https://www.barrons.com/articles/inflation-stocks-bond-market-51639184279?mod=hp_LEAD_3 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/12-13-21_Barrons_If%20Inflation%20Isnt%20a%20Threat%2c%20These%20Beaten%20Up%20Stocks%20Might%20Be%20a%20Bargain_2.pdf)
https://www.barrons.com/articles/why-the-markets-are-shrugging-off-the-latest-inflation-numbers-51639154714 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/12-13-21_Barrons_Why%20the%20Markets%20Shrugged%20Off%20the%20Latest%20Inflation%20Numbers_3.pdf)
https://fred.stlouisfed.org/series/T5YIE
https://www.economist.com/finance-and-economics/why-high-inflation-will-persist-in-america-well-into-the-new-year/21806769
https://www.espn.com/college-football/story/_/id/32792986/michigan-cade-mcnamara-big-ten-title-wanted-win-coach-harbaugh (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/12-13-21_The%20Economist_Why%20High%20Inflation%20Will%20Perisist%20in%20America%20Well%20Into%20the%20New%20Year_6.pdf)
http://www.sca.isr.umich.edu
https://www.aaii.com/sentimentsurvey
https://www.aaii.com/journal/sentimentsurveyarticle
https://sts3.wsj.net/barrons/static_files/newsletterPreviews/marketLab.html (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/12-13-21_Barrons_Market%20Lab_10.pdf)
https://www.barrons.com/market-data/market-lab?mod=md_subnav (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/12-13-21_Barrons_Market%20Lab%202_11.pdf)
https://www.brainyquote.com/authors/john-kenneth-galbraith-quotes

COVID-19 strikes again.

Coronavirus cases have been on the rise in Europe, climbing from about 700,000 new cases a week in September to 2.6 million a week in November, reported Richard Pérez-Peña and Jason Horowitz of the New York Times. As Thanksgiving approached, there was concern that travel and togetherness could increase the number of cases in the United States, too, creating stress on already taxed healthcare systems. Jamie Smyth and Caitlin Gilbert of the Financial Times explained:

“…what was expected to be a celebration has become fraught with danger in some Midwestern states, where vaccination rates are low and COVID-19 cases are rising rapidly after a summer lull…Nationally, cases have increased by nearly 30 percent since the beginning of the month…”

Financial markets took the fall surge in stride. They were less sanguine when news broke last week that a new variant of coronavirus, called “omicron,” had been identified in South Africa and was spreading.

Little is currently known about omicron. In Nature, Ewan Callaway reported the variant has a significant number of mutations, which is concerning. Scientists are tracking omicron’s spread and working to “understand the variant’s properties, such as whether it can evade immune responses triggered by vaccines and whether it causes more or less severe disease than other variants do.”

Global stock indices and oil prices dropped sharply on Friday, which was a holiday-shortened trading day, reported Chris Prentice and Carolyn Cohn of Reuters. U.S. Treasury bonds rallied as bond prices were pushed higher by investors seeking lower-risk opportunities. FactSet reported:

“[The Standard & Poor’s 500 Index] logged its worst day since late February and all major indices finished the week in negative territory. All sectors ended lower with moves highly influenced by today’s [COVID-19] variant concerns…Healthcare held up best…”

Although it was overshadowed by news of a new coronavirus variant, the pace at which the Federal Reserve will tighten monetary policy (to keep inflation in check) also was on investors’ minds last week. Reuters reported that strategists at Goldman Sachs expected the Fed to tighten faster than anticipated, suggesting that interest rates could move higher sooner.

Wear a shoe, plant a tree…In 1987, the United Nations Brundtland Commission offered a definition for sustainability: Meeting the needs of the present without compromising the ability of future generations to meet their own needs. Today, innovators are developing goods that enhance our lives and the world around us. Here are a few projects that may intrigue shoe enthusiasts:

Apple tree kicks. A Canadian fashion designer has developed biodegradable kicks that have fertilizer and apple seeds in the heels. When the shoe wears out, the owner can bury it and grow a tree. “The materials which the shoe is made from contain naturally-occurring compounds which attract microorganisms to feed on and break down the shoe over three years. Even if you don’t get around to burying them, they will still biodegrade if thrown in a landfill,” reported Andy Corbley of the Good News Network.

Garbage patch sneaks. You may have heard of the Great Pacific Garbage Patch. It’s a spinning vortex of plastic waste and other marine debris that is “…comprised of the Western Garbage Patch, located near Japan, and the Eastern Garbage Patch, located between the U.S. states of Hawaii and California,” reported National Geographic. A global sneaker company is recycling plastic ocean debris into polyester yarn that is woven into material for shoes, reported Clancy Morgan of Business Insider.

Vegan trainers. A German multinational is working with a biotech start-up to make biological leather from mycelium – the part of fungi that produces mushrooms, according to the Good News Network. The material is a substitute for real leather in athletic shoes. Other companies make vegan leather from pineapple leaves, cork, apple peels, and other materials, reported Harper’s Bazaar.

When evaluating sustainable fashion, beware of green washing – claims that a company’s products are environmentally friendly when they’re not. As with so many things, it is important to do your own research.

Weekly Focus – Think About It

“Infinite growth of material consumption in a finite world is an impossibility.”
— E.F. Schumacher, statistician and economist

Investment advice offered through Research Financial Strategies, a registered investment advisor.
* This newsletter and commentary expressed should not be construed as investment advice.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

Investment advice offered through Research Financial Strategies, a registered investment advisor.

Sources:
https://www.nytimes.com/2021/11/26/world/europe/coronavirus-omicron-variant.html (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/11-29-21_New%20York%20Times_New%20Variant%20of%20Concern%20Fuels%20Global%20Fear_1.pdf)
https://www.ft.com/content/cde3ef32-a754-4aae-82ca-7d8153af51b7 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/11-29-21_Financial%20Times_US%20Braces%20for%20Fifth%20Wave_2.pdf)
https://www.nature.com/articles/d41586-021-03552-w/
https://insight.factset.com/topic/earnings
https://www.reuters.com/markets/europe/global-markets-wrapup-6-2021-11-26/ (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/11-29-21_FactSet_US%20Equities%20Close%20Lower_5.pdf)
https://www.reuters.com/business/finance/fed-kick-off-faster-tapering-plan-january-goldman-sachs-2021-11-25/
https://www.un.org/en/academic-impact/sustainability
https://www.goodnewsnetwork.org/canadian-fashion-designer-makes-shoes-that-grow-into-apple-trees/
https://www.nationalgeographic.org/encyclopedia/great-pacific-garbage-patch/ (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/11-29-21_Society_Great%20Pacific%20Garbage%20Patch_9.pdf)
https://www.businessinsider.com/adidas-sneakers-plastic-bottles-ocean-waste-recycle-pollution-2019-8
https://www.goodnewsnetwork.org/mushrooms-new-adidas-plant-based-shoes-mushrooms-2021/
https://www.harpersbazaar.com/uk/fashion/fashion-news/a30640996/vegan-leather-sustainability/
https://www.investopedia.com/terms/g/greenwashing.asp
https://www.brainyquote.com/quotes/e_f_schumacher_389554

Thinking about the possibilities.

The Standard & Poor’s (S&P) 500 Index finished last week slightly higher and has gained about 6 percent during the past 25 days; however, investors have curbed their enthusiasm. The S&P 500 hasn’t experienced a move of one percent or more in 25 trading days. That’s the longest period without a move of that size in about two years, according to a source cited by Avi Salzman of Barron’s.

It’s possible investors are taking time to think about the current mix of conditions and how the economy and financial markets may be affected. For example:

• Consumers have said they’re concerned about inflation. The University of Michigan’s Consumer Sentiment Index declined in early November on a year-to-year and a month-to-month basis. Survey participants indicated their outlook was negatively affected by inflation concerns, reported Surveys of Consumers Chief Economist Richard Curtin.
• Retail sales were higher than expected. There was a difference between what consumers said and what they did.Despite inflation concerns, retail sales were up 1.7 percent from October to November and 16.3 percent year-over-year, reported Jeff Cox of CNBC.
• Companies were very profitable during the third quarter. Supply chain issues and inflation were frequently mentioned by companies during earnings calls, but they didn’t affect corporate profits. The majority (82 percent) of companies reported higher than expected earnings per share. On average, company profits were up 39 percent year-over-year, which was the strongest growth since 2010, reported John Butters of FactSet.
• The oil shortage may already be over. Oil prices dropped last week. A surge of COVID-19 cases in Europe is expected to slow demand just as supplies may increase as some countries begin to release oil from strategic petroleum reserves, reported Avi Salzman of Barron’s.During the past decade, oil prices have accounted for about 56 percent of the price of a gallon of gasoline, according to the U.S. Energy Information Administration. As oil prices fall, gasoline prices also may move lower.

The performance of major U.S. stock indices was mixed last week, according to Avi Salzman of Barron’s. The yield on 10-year U.S. Treasuries dropped last week.

We hope you have a wonderful Thanksgiving.

Infrastructure and economic growth…The bipartisan Infrastructure Investment and Jobs Act (IIJA) was signed into law last week, and the Build Back Better Act (BBBA) passed the House of Representatives and moved on to the Senate.

For decades economists have tried to determine how spending on infrastructure – roads, bridges, canals, railways, broadband and other projects – contributes to economic growth. There are diverse opinions on the subject. Here are a few:

“Increasing infrastructure investment has significant macroeconomic benefits. Near term it has a large so-called multiplier—the increase in GDP for a dollar increase in investment. It is among the highest compared with other types of federal government spending and tax policy… In a full-employment economy, the GDP multiplier on traditional infrastructure is estimated to be 1.23 one year after the investment, and 1.12 for nontraditional infrastructure. It is higher when the economy is operating below full employment.”
— Mark Zandi and Bernard Yaros, Jr., Moody’s Analytics, July 21, 2021

“Infrastructure spending by government can boost long-run economic growth by making an economy more productive, in part by improving connectivity – both physical and digital…The point here is that there can be diminishing returns from spending…I view infrastructure investment primarily as a way of boosting the economy’s speed limit. Government should focus on high-value projects.”
— James Pethokoukis, American Enterprise Institute, April 2, 2021

“A new era of large-scale infrastructure investment would necessarily be less revolutionary than the railways and roads of the past. Yet it might nonetheless prove surprisingly transformative in its direct economic impact, its knock-on effects on private industry—and in the psychological spur it provides to a country that could do with a bit of reinvigoration and renewal.”
— The Economist, May 1, 2021

“Finally, even if infrastructure investment had no impact on employment, productivity, and growth, it’d still deliver public goods that should be available to all but that may not be profitable to produce privately (such as rural broadband).”
— Marcela Escobari, Dhruv Gandhi and Sebastian Strauss, Brookings Institute, March 17, 2021

The IIJA will invest approximately $1.2 trillion, including $550 billion in new spending, on infrastructure projects across the United States. IIJA is expected to increase the deficit by about $256 billion over the next 10 years, according to the Congressional Budget Office.

Weekly Focus – Think About It

1. Which of the following holds the largest portion of the U.S. national debt?
2. China
3. Social Security
4. Military Retirement Fund
5. Japan
6. Medicare

Answer: B

Investment advice offered through Research Financial Strategies, a registered investment advisor.
* This newsletter and commentary expressed should not be construed as investment advice.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

Investment advice offered through Research Financial Strategies, a registered investment advisor.

Sources:
https://www.barrons.com/articles/stock-market-earnings-season-inflation-51637374587?refsec=the-trader (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/11-22-21_Barrons_Stocks%20Are%20Up%208%20%25%20Since%20Earnings%20Season%20Started_1.pdf)
http://www.sca.isr.umich.edu (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/11-22-21_Surveys%20of%20Consumers_2.pdf)
https://www.cnbc.com/2021/11/16/retail-sales-rise-faster-than-expected-in-october-even-as-inflation-pushes-prices-higher.html
https://insight.factset.com/earnings-insight-q3-21-by-the-numbers-infographic
https://insight.factset.com/highest-number-of-sp-500-cos.-citing-supply-chain-on-q3-earnings-calls-in-over-10-years
https://www.barrons.com/articles/oil-prices-drop-on-bearish-supply-and-demand-signals-51637336738 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/11-22-21_Barrons_Oil%20Prices%20Drop%20on%20Bearish%20Supply%20and%20Demand%20Signals_6.pdf)
https://www.eia.gov/energyexplained/gasoline/factors-affecting-gasoline-prices.php
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/textview.aspx?data=yield
https://www.natlawreview.com/article/biden-signs-largest-climate-and-resiliency-infrastructure-bill-us-history
https://www.cnbc.com/2021/11/19/house-passes-build-back-better-act-what-happens-next-in-the-senate.html
https://www.moodysanalytics.com/-/media/article/2021/macroeconomic-consequences-infrastructure.pdf
https://www.aei.org/economics/the-limits-of-infrastructure-spending-to-boost-economic-growth/
https://www.economist.com/finance-and-economics/2021/04/29/what-an-infrastructure-bonanza-could-mean-for-americas-economy (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/11-22-21_The%20Economist_What%20an%20Infrastructure%20Bonanza%20Could%20Mean%20for%20Americas%20Economy_13.pdf)
https://www.brookings.edu/research/how-federal-infrastructure-investment-can-put-america-to-work/
https://www.jdsupra.com/legalnews/infrastructure-investment-and-jobs-act-2678111/
https://www.cbo.gov/publication/57406
https://www.thebalance.com/who-owns-the-u-s-national-debt-3306124