Three Things to Know & Watch

Feb 7, 2022

By Bill Hornbarger, Chief Investment Officer

Three Things to Watch

  • After last week’s surprisingly strong jobs report, inflation will be the focus this week. CPI will be released on Thursday and overall CPI is expected to jump to 7.3% on a year-over-year basis with core CPI expected up 5.9%. Last month, CPI was reported at 7% and the 7.3% (consensus forecast) for January would be the highest since 1982. Markets are pricing in more aggressive Fed action after the January jobs report, bringing heightened scrutiny to the inflation outlook.
  • On Friday, the University of Michigan will release the consumer sentiment survey results. This indicator has been trending down, and the February survey period captures a period of volatility for stocks and higher energy prices for consumers. One- and five-year inflation expectations are also part of this report.
  • Dozens of earnings reports will be out this week. Some of the blue chip names include Coca-Cola, Walt Disney and Pfizer. One earnings report that will be watched closely is Peloton, which has struggled recently after being a superstar early in the pandemic. To date, of the 278 S&P 500 companies that reported earnings, 76% posted positive surprises.

Three Things to Know

  • The FAO Food Price Index is at a record high as of the end of January and is up 19.5% from a year earlier. The FAO Food Price Index (FFPI) is a measure of the monthly change in international prices of a basket of food commodities. It consists of the average of five commodity group price indices weighted by the average export shares of each of the groups over 2014-2016. (Source: Food and Agricultural Organization of the United Nations).
  • Bond yields are rising on a global basis. After trading with a negative yield since May 2019, the German 10-year government bond is now trading with a positive yield of 0.20% as of last week’s close. Other developed countries with negative yields recently, such as Switzerland and Japan are experiencing similar trading patterns. (Source: Bloomberg).
  • If the year ended today, it would be the worst in history for the U.S. bond market with a loss of 3%. Entering the year, the 2.9% loss for bonds in 1994 was the largest ever. (Source: Charlie Bilello).

 

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.