Three Things to Know & Watch – 02 Jan, 2022

By Bill Hornbarger, Chief Investment Officer

Three Things to Watch

  • The new year starts with a busy calendar. Top-tier economic releases this week include The ISM manufacturing survey for December, released on Tuesday and the employment report released on Friday. The jobs report is forecasting 400,000 new jobs and an unemployment rate of 4.1%, the lowest since pre-pandemic. Both reports are expected to reflect that the economy closed the year on solid footing.
  • The ISM and employment reports will bookend the release of the mid-December Federal Open Market Committee meeting minutes. Market participants will pay close attention, looking for clues on the possibility of rate increases happening sooner than currently expected. Futures indicate the first interest rate increase is now expected at the March 16 meeting.
  • OPEC and OPEC+ meet Monday and Tuesday, respectively. OPEC will discuss the appointment of a new secretary general and OPEC+ will decide output policy. OPEC+, which made record output cuts last year, is likely to stick to existing policy and confirm an output increase of 400,000 barrels per day in February.

Three Things to Know

  • The so-called January indicator failed the last two years. The idea is that whatever the S&P 500 does in January foreshadows its performance for the rest of the year. However, in both 2020 and 2021, January posted negative returns for the S&P 500 followed by strong gains for each calendar year. (Source: Bloomberg)
  • 64% of last year’s gain for the S&P 500 (26.6% index price return) was generated by the top 25 stocks and almost half (48%) from just the top 10 stocks. This still ranks behind the top stocks’ performance during the TMT (tech/media/telecom) bubble of the early 2000s when the return of the top 10 and top 25 stocks accounted for more than 60% and 80% of the indexes gain, respectively. (Source: The Market Ear, JP Morgan)
  • All 11 S&P 500 sectors finished with double-digit percentage gains in 2021. The three worst-performing sectors in 2020 (Energy, Real Estate, Financials) were the three best performers in 2021. (Source: Compound Capital)

 

The above information reflects the current opinion of the author. It is based upon sources and data believed to be accurate and reliable. Opinions and forward-looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security mentioned.