Where to Find in Advance About Announcements That Might Affect the Stock Market

Weekly market wrap

Published December 23, 2021

2021 in Review: The Year in 5 Charts

In 2021, the world returned closer to normal, merely the epidemic continues to pose unique challenges. Straight-grained though thither were a few market twists and turns, the year gave investors the best of both worlds: plenty of upside, with just about major indexes achieving rugged double-digit returns, and limited downside, with infrequent and short-lived pullbacks.

Supported away a strong economic recovery and very accommodative monetary system policy, the S&P 500 reached an impressive 67 record highs this year, the most since 1996 (which continues to keep the 50-class platte).¹ 2022 is likely to raise more challenging, but the outlook remains positive, in our view.

Below are five highlights that defined the thriftiness and the markets all over the past 12 months, along with potential implications for 2022.

1. The economy grew at its fastest pace in nearly four decades

• Powered by massive fiscal and medium of exchange stimulus, a vaccine rollout and pent-up consumer requirement, U.S. GDP likely grew about 5.5% in 2021, the fastest yard since 1984.² With the benefit of vehement household consumption (70% of the thriftiness), economic activity reclaimed its pre-pandemic peak in the second base after part, a remarkable achievement considering the depth of last year's niche.
• Household finances emerged from the crisis in better condition than they went into it, courtesy of government support and a ascending stock exchange and base prices. Spending on big-ticket items surged, pushing goods consumption considerably above its pre-pandemic trend. On the early hand, spending on services is static trying to go back amid the ongoing pandemic.
• Unemployment declined from 6.7% at the beginning of the year to 4.2% in November, achieving in ace year what took almost quartet years in the last expansion (2014 to 2017).¹ As the year ends, thither are increasing signs of labor market concentration. Job openings exceed the figure of unemployed, and policymakers are non convinced the more than 2 million multitude who possess left the manpower will return.¹
• 2022 implications – Ontogeny will likely moderate from this year's rapid yard to about 3%-4%, just this is still above the 2.2% average over the last decade.¹ Even though the stimulus testament slice, consumers saved a good portion of the government income they acceptable, and further jobs gains will stay supporting incomes. A gas-filled return to normalcy, though difficult to time, is likely to unleash repressed demand for services such as go by and entertainment.

^{Source: Federal Substitute of St. Louis, Real Personal Expenditure Expenditures, Billions of Chained 2012 Dollars}

The graphs shows consumer spending on goods, which has risen sharply, and spending on services, which remains infra its pre-epidemic trend.

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2. Inflation successful a comeback as fortified call for met constrained supply

• 2021 has been the year of high prices and inflation surprises. The consumer price level (CPI) has topped 5% for seven straight months, with the November reading coming in at 6.8%, the highest in 40 eld.¹ Amid material and labor shortages, supply has struggled to keep pace with the rapid recoil in demand for goods, driving prices high.
• 2022 implications – Pompousness will be front and center as central banks gearing improving toward pace hikes to tame fast-rising prices. We wait that easing in supply concatenation bottlenecks and the shift back to services from goods will help inflation crown in the coming months and temperate from in that location. Also, we don't forebode a repeat of this year's surge in muscularity prices. However, because of signs that price pressures are broadening (lease increases, ascent wages), we opine inflation will stay above the Federal Reserve's 2% long-term target done following class. An appropriate allocation to equities tin help protect portfolios against the impacts of splashines over time.

^{Seed: Federal Military reserve of St. Joseph Louis Barrow, 12/22/21.}

The chart shows this year's sharp rise in the CPI, even later excluding the volatile categories of food and energy.

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3. Emerging corporate earnings propelled stocks higher

• With a week left field in 2021, the S&P 500 is hovering near record highs, up astir 25%. This ranks sixth in annual toll gains over the last 40 years.¹ A key fruit underpinning tooshie this sizeable market return has been the rugged cyclical rebound in corporate earnings, which has Thomas More than offset a small decline in valuations.
• The abundance of economic growth drove corporate receipts higher, and pricing exponent along with productivity improvements helped margins (profitability levels) extend to a phonograph record in high spirits. With strong economic and earnings growth, U.S. equities logged some other year of outperformance versus the rest of the world.
• 2022 implications – We reckon the papal bull market stirred from the early recovery stage to a mid-cycle phase this past spring. As it progresses further into this phase, the pace of earnings and market gains will likely slow. A smooth-strong demand backdrop bequeath continue to keep earnings, helping sustain the bull through market. Even so, valuations are unlikely to expand, in our view, and could modest some, especially if central banks start hike rates American Samoa we expect.

^{Source: FactSet, 12/22/21.}

The graph shows the change in the price-to-earnings multiple and the change in forward profit for the S&P 500. Valuations have moderated as earnings blush wine more than the S&P 500 this year.

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4. Pandemic waves triggered rotations in leadership

• Since the beginning of the year, stocks have remained in a steady and for the most part uninterrupted uptrend, with only one 5% pullback (vs. a arts average of three annually).¹ While the stock market stayed elastic and investors looked through various pandemic-related setbacks, a look under the cowl reveals some major shifts in leadership.
• Following the vaccine rollout, optimism roughly the economic reopening drove sizable gains in economically sensitive investments, including cyclical sectors, small-caps, value investments and international stocks. However, ordered COVID-19 waves and new computer virus variants interrupted the recovery and pushed boost back any chance for synchronized global growth.
• As a answer, the outperformance of plus classes and sectors that benefit from the reopening reversed around May, about when the 10-year yield peaked, and technology and growth stocks regained leading. Despite the recent caution, cyclical sectors remain connected path to outpace the antiaircraft sectors, with energy and financials delivering their best returns in years.
• 2022 implications – The path of the virus will continue to cast the flow from of the economy, but each virus undulation has had a smaller negative impression on the economic system. We now suffer more than medical solutions available, and governments are less willing to impose severe restrictions on activity. As the reopening continues next twelvemonth, we think value investments are verisimilar to continue to benefit from above-style economic growth. We recommend a balanced approach to sectors as the Fed dials posterior its accommodation and the fiscal stimulus boost fades. From an plus class view, we think there is catch-upwards potential in select international markets and favor investments that are the much attractively priced, such as future-marketplace equities and International small- and mid-caps.

^{Source: FactSet, 12/22/21.}

The graphs shows the S&P 500 sector returns in 2021. Despite periodic interruptions triggered away virus waves, cyclicals outperformed defensives.

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5. Excess fluidness coal-fired speculation in pockets of the market

• Since 2020, the Fed input has helped maintain constancy in the credit system by sullen adoption costs for consumers and businesses. However, this unnecessary liquidity – or cheap money – animated "animal spirits" that often emerge in a strong bull market and found its style into certain take a chanc assets. The meteoric gains in so-called meme stocks" (e.g. GameStop, AMC, BlackBerry), cryptocurrencies and NFTs (not-fungible tokens) caught investors' worry even as prices in many cases were disconnected from fundamentals.
• 2022 implications – We expect real yields (after inflation) to ascension from near-phonograph recording lows. The gradual removal of excess liquidity and rate hikes will likely flicker bouts of volatility in the frothier segments of the market. We don't call back these speculative areas represent a systemic threat, but we see investor sentiment and positioning as headwinds heading into the New Year. Equally the bull securities industry progresses, a focus on high-quality investments and diversification across asset classes becomes Sir Thomas More of import.

^{Author: FactSet, 12/22/21.}

The graphs shows the path of the 10-year Treasury bear and the 10-year realistic buckle under (after adjusting for expected inflation). While formal yields have moderately risen, real yields remain ungenerous record lows.

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Farewell, 2021

The year has seen fast growth, above-average equity returns, splashines and some speculation. The economic outlook remains bright, but as markets begin adjusting to slower growth and tighter medium of exchange conditions, volatility is liable to step-up, and returns will likely moderate. Hold back realistic expectations for returns, soma properly wide-ranging portfolios, and remain opportunistic during times of volatility.

From all of us at Edward Jones, we wish you happy holidays and a healthy and prosperous late yr!

Angelo Kourkafas, CFA
Investiture Strategist

^{Sources: 1. FactSet, 2. FOMC December efficient projections}

Weekly grocery stats

Weekly market stats

Forefinger	CLOSE	WEEK	YTD
Dow Jones Blue-collar Average	35,951	1.7%	17.5%
S&P 500 Power	4,726	2.3%	25.8%
NASDAQ	15,653	3.2%	21.5%
MSCI EAFE *	2,316.10	1.6%	7.8%
10-yr Treasury Yield	1.49%	0.1%	0.6%
Oil ($/bbl)	$73.92	4.5%	52.3%
Bonds	$114.19	-0.3%	-1.5%

^{Germ: Factset. 12/23/2021. Bonds represented by the iShares Heart U.S. Aggregate Bond ETF. Agone performance does not guarantee future results. *Source: Morningstar 12/24/21.}

The hebdomad ahead

System information leave embody get off next week.

Review last week's every week commercialize update.

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Angelo Kourkafas

Important Information:

The Weekly Market Update is published every Friday, after market close.

This is for informational purposes only and should not be interpreted as specific investment advice. Investors should establish investment decisions based on their unique investment objectives and financial situation. While the entropy is believed to embody accurate, it is not guaranteed and is subject to change without notice.

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Past performance does not guarantee future results.

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Special risks are inherent in international investment, including those related to vogue fluctuations and foreign thought and economic events.

Where to Find in Advance About Announcements That Might Affect the Stock Market

Source: https://www.edwardjones.com/us-en/market-news-insights/stock-market-news/stock-market-weekly-update

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