• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Contact Us Today!
800.317.9119

Investor Resources Inc.

Portfolio Management, Wealth Management, Investment Analysis

Client Portal Login
  • Home
  • Welcome to IRI
  • Investment Process
  • Research & Strategies
    • About the RPM System
    • 401K Defense
    • Theory or Reality
    • Fiduciary
    • Concentration
    • Managing the Unexpected
    • Disciplined Flexibility
    • Modern or Aged?
    • Change or Hope?
    • Not Modern? Then What?
    • Math – Not Magic!
  • Radio Shows
  • Video
  • Investor Blog
  • Contact Us
Week In Review – December 20 2021

Week In Review – December 20 2021

December 20, 2021 by Don Creech, CCO

Federal Reserve Tapers Faster and Expects to Raise Rates in 2022… The central bankers announced that they will reduce bond buying by $30 billion per month, likely ending the program in March, and then will start raising rates. They expect to raise rates three times next year.

What it means—The faster tapering was widely expected, but the pace of raising rates next year was not. The markets dipped briefly on Wednesday then soared for the rest of the day before giving up the gains every day since. This might have more to do with mutual fund and pensions rebalancing before year-end. Semiconductors and tech were hammered last week with defensive sectors, financials, health care, and consumer staples under pressure on Monday.

The central bankers claim to be fighting inflation, but they didn’t create it and can’t end it. The current bout of inflation is courtesy of Uncle Sam sending free cash to consumers driving demand above supplies. The Fed created inflation in financial assets with a well-intentioned objective of maintaining bank solvency. That’s where we must look for possible solutions.

With inflation near 7% and the Fed stepping away from the bond market long-term bond rates should move higher. Expect equity investors to rotate from high-growth names to those that pay dividends, as well as to financial stocks.

November Producer Price Index Rose 0.8% … The increase was well ahead of expectations.

What it means—Just when you thought inflation was running hot, it looks like wholesalers and suppliers are still experiencing even worse inflation. Higher costs will likely be passed along as higher prices to retailers, who then will pass them along to consumers. Will inflation breach 7% next month? Such a thing would have sounded crazy at the start of the year, and now it is just a few tenths of a point away.

November Retail Sales Up 0.3%, Short of Expectations… The weaker report came after retail sales jumped 1.8% in October.

What it means—Contrary to what reporters often write, consumers are bright. We recognized supply chain snarls and started Christmas shopping early. By pulling forward spending, we took a little pressure off retail sales in November and likely December as well. That said, retail sales are still 18.2% higher than in November 2020. Granted, that’s a nominal number, but if we reduce the gain by the 6.8% rate of inflation, retail sales are still 11.4% higher than this time last year.

That’s a monster number, and it goes a long way toward explaining why the supply chain remains stretched. It won’t last forever. The extra cash pumped into the markets by Uncle Sam’s stimulus programs is fading. Expect retail sales to ease in 2022.

Housing Starts Rose 12% in November, to 1.68 Million Annualized… Housing starts were up 8% over last year.

What it means—Before last month, housing starts had slowed vs. last year, so the jump in November is welcome, if suspect. Let’s hope it continues. The National Association of Realtors estimates that we’ll need five million homes to catch up to demand. That won’t happen in a matter of months or even a few years.

It took a decade of underbuilding to get into this predicament, and chances are it will take at least five to seven years to dig out of it. For anyone trying to buy their first home, we’ll hope rising rates take a little pressure off the real estate market for at least a few months. Other than that, expect it to be a seller’s market for a long time.

The Bank of Canada announced the end of its bond buying in October 2020. It has not replaced maturing bonds on its balance sheet. It ended its programs of financial support in October 2021 as the Fed was just beginning to consider similar policy changes. The Canadian housing market may be an early indicator of how the marker adapts to the lack of central bank supports.

Norway Bans Alcohol During the Holidays… The Grinch must be a Norwegian bureaucrat. Nothing says killjoy like taking away the punchbowl before the party starts. The Nordic nation banned the sale of alcohol in hospitality venues (bars, restaurants, etc.) for four weeks starting at midnight on December 14. Prime Minister Jonas Gahr Støre said that the government is trying to stop the spread of the COVID omicron variant, which is proving to be more transmissible but less virulent than previous mutations. Støre said that many will say this feels like a lockdown—and he’s right, it’s a lockdown on fun. The alcohol ban is in addition to mask mandates and limited access to gyms and other facilities.

We wish you and your family a very Merry Christmas.

 

Data supplied by HS Dent Research

“When the facts change, I change my mind.

What do you do?” ~ John Maynard Keynes

Our plan is “the plan will change.”

What is your plan?

 

Relative strength measures the price performance of a stock against a market average, a selected universe of stocks or a single alternative holding. Relative strength improves if it rises faster in an uptrend, or falls less in a downtrend. It is easily applied to individual positions in your portfolio and to sectors and asset classes.

 

A copy of our form ADV Part 2 is available online.

 

Investor Resources, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion.

Filed Under: Economy, Federal Reserve, Real Estate Tagged With: federal reserve, housing starts, ppi, retail sales

Investor Resources Radio

The Investor Resources Radio Show airs on KTTH AM 770 every Saturday at 10:00 AM. Listen to Don ...

Read More

Seminars

Tired of being told that a diversified portfolio will keep your investments safe, then watching them lose ...

Read More

Webinar Registration

April Market Update Saturday, April 1st at 8:30am. Click here to register now. Change is the ...

Read More

Meet The IRI Team

We have assembled a skilled and experienced team of experts that will help you navigate any financial situation. ...

Read More

Copyright © Investor Resources Inc. All rights reserved. Investor Resources, Inc. is a registered investment adviser in the States of Washington, Arizona and Texas. The adviser may not transact business in states where it is not appropriately registered, excluded or exempted from registration. Individualized responses to persons that involve either the effecting of transaction in securities, or the rendering of personalized investment advice for compensation, will not be made without registration or exemption.

Compliance  |  Important Customer Disclosure  |  ADV Part 1 and 2

Terms of Service  |  Sitemap

Bellevue Office: 601 - 108th Ave. NE, Suite 1900, Bellevue, WA 98004  Phone: 425.673.5000

Port Orchard Office: 1922 Pottery Ave., Suite 110·Port Orchard, WA 98366  Phone: 360.895.9119

Login

Lost your password?

Reset Password

Log in