1982 – Monday Morning Market Memo – December 13, 2021

1982 – Monday Morning Market Memo – December 13, 2021

In 1982 Ronald Reagan was serving as the 40th President of the United States, Paul Volcker was Chairman of the Federal Reserve, and the Dow Jones Industrial Average finished the year around 1,000. For some pop culture – Physical by Olivia Newton-John and Eye of the Tiger by Survivor were topping the music charts, while E.T. the Extra-Terrestrial was the number one film. If you’re wondering why we’re referencing 1982 – although the reminiscing is enjoyable – it’s because that’s how far back one has to look to find and inflation number as hot as it is currently.

Last Friday morning, the U.S. Department of Labor reported the Consumer Price Index (inflation) jumped 6.8% last month. This is the highest rate of inflation in nearly four decades, with rising prices for food, housing, and energy contributing to much of the increase. While the CPI was slightly higher than what markets expected, “whisper” numbers indicated many thought the number would be even higher. So despite the hot read on inflation, the three major stock market indices closed higher on the day, with the S&P 500 up nearly 1% Friday. The indices also posted strong weekly gains.

For the week, the Dow Jones Industrial Average gained 4% to 35,971, snapping a four-week losing streak – the NASDAQ Composite added 3.6% to 15,631 – and the Standard & Poor’s 500 Index rose 3.8% to a new record high close of 4,712. During the week ahead, investors will be intently focused on the upcoming Federal Reserve meeting…..

The November inflation number (along with solid economic growth and an improved employment picture of late) solidified market expectations for a faster tapering (reduction of asset purchases) and the likelihood of at least two rate increases in 2022. Chair Powell holds a press conference Wednesday afternoon, and with shifting/pivoting monetary policy, markets will most definitely be Fed watching this week! Remember, investing for the long term entails cycles (one of which is Federal Reserve cycles), we advocate time in the market, not timing the market!

All the best – Southport Station Financial Management, LLC