Markets are off to a rough start in 2022. So much for the Santa Claus Rally; it fizzled as the ‘Ball’ dropped. The Federal Reserve released the minutes of its December meeting this past Wednesday, and what was ‘inside’ them apparently took the market by surprise. Economists point out that the Fed discussed winding down its balance sheet–something Chairman Jerome Powell failed to mention at the press conference last month–and its perception of the job market, which appears to be near to full employment. Investors took the news badly. The week was marked by big swings across stock and bond markets, as investors have ‘exited’ some of the most popular trades of the past year, after digesting the signals from the Federal Reserve on the path of rate increases. “Two months ago, the markets believed they were going to have to push the Fed, now that’s not the case,” said Chris Harvey, U.S. equities strategist at Wells Fargo Securities. The S&P 500 ended the week with a loss of 1.9%, while the Dow Jones Industrial Average lost 0.3%, the least affected index. The tech-heavy Nasdaq Composite fell 4.5%, its worst week since February, with the ‘popular star performers’ taking a beating. But perhaps the real market news is that the prospect of a ‘less accommodative’ Fed lifted interest rates, which in turn slammed risky assets. The 10-year TIPS yield was up 23 basis points on the week, while the five-year TIPS yield rose 28 basis points to a minus 1.33%. (A basis point is 1/100th of a percentage point.) The turbulence hasn’t been limited to the stock market: The yield on the 10-year Treasury note has jumped for five consecutive sessions to its highest level since January 2020, before the pandemic started spreading aggressively through the U.S. “Markets are a bit spooked here from the ‘minutes’ and maybe a bit of what they’re seeing in the labor market,” said Mona Mahajan, senior investment strategist at Edward Jones. The job report showed that the U.S. added 199,000 jobs in December, below the 422,000 expected by economists surveyed by The Wall Street Journal. Average hourly wages increased 4.7% in December, from a year earlier.
Cryptocurrencies led by Bitcoin and Ether slumped as part of a broader tech sell-off, ‘cementing’ their status among investors as risky assets quickly dumped in moments of market stress. The falls were triggered by Federal Reserve minutes that showed officials are strongly eyeing a faster timetable for raising interest rates this year. As rates rise, holding volatile investments that produce little income become less attractive compared with government bonds. Bitcoin has declined about 6% since the release of the December Fed minutes on Wednesday and recently traded at $42,865.48. “This is proof that bitcoin acts like a risk asset,” said Noelle Acheson, head of market insights at crypto lender Genesis Global Trading. “The short-term holders, they are the ones who are trading and will be closest to the exit, she said. Bitcoin’s value neared $68,000 last November, edging downward thru the end of the year. “It has been range bound and seemed to be waiting for a catalyst one way or another, and the hawkish Fed was the catalyst,” said Craig Erlam, senior analyst at firm Oanda. Bitcoin and other cryptocurrencies are notoriously volatile and often ‘gyrate’ on news of them being accepted in mainstream parts of the economy; rumors or pronouncements from celebrities. (The likes 0f Mark Cuban, Elon Musk, John Paul Jones, a hedge fund manager, to name a few)
Uranium Surges On Instability In Kazakhstan…..Instability in Kazakhstan, the world’s biggest uranium producer, threatens to curb output and boost prices at the same time supplies of nuclear fuel are becoming tighter. Dozens of people died Thursday when authorities moved against protesters after several days of unrest, and the arrival of Russia-led military alliance to quell the disorder. Traders and mining companies say the protests might make it difficult to transport workers and equipment to mine sites. Kazakhstan, a Russian ally, produces about 40% of the world’s uranium output and sells it to utilities in the U.S. and other Western countries. It has established a reputation as a reliable supplier. Uranium prices have jumped since protests erupted Sunday in Kazakhstan’s western Mangistau region over rising energy prices, prompting the government to resign. Prices have moved up briskly from $42.00 a pound at the start of the year to $46.00 on Thursday. (1-6-2022) The protests pushed crude-oil higher too. Kazakhstan is a member of the OPEC+ alliance and produced about 1.7 million barrels of oil a day in November, according to the International Energy Agency, just under 2% of what the world consumed each day last year.
RUMBLINGS ON THE STREET
Fahad Kamal, chief investment officer at Kleinwort Hambros, WSJ “Everything happening in markets this week was about expectations on how fast the Fed is going to tighten policy,” he continues, “This is a transition year where we go from record policy support toward actual tightening. There will be huge volatility as we figure out how to work in this paradigm.”
Larry Fink, CEO, BlackRock, speaking to the Wall Street Journal, WSJ “I believe in the power of American capitalism. Progressives don’t believe deficits matter. I Do.”
Marc Goldwein, the senior vice president and senior policy director at ‘Committee for a Responsible Federal Budget, Barron’s “If you’re worried about inflation you should be worried a little bit more” once state and local spending is taken into account, says Mr, Goldwein. “And if you’re worried about economic contraction, you should be worried a little bit less.”
Amy Domini, Founder and Chair, Domini Impact Investments. Barron’s “Today, more investors understand that avoiding trouble is a good way to make money.”
BY THE NUMBERS, Barron’s 1.5, The number of available jobs per unemployed American in November. 10.6 million jobs, 6.9 million jobless.
$1.6 trillion, Total volume of loans provided by U.S. mortgage lenders in 2021, a record.
1.6 billion, Number of people worldwide who connect to the internet through an Apple product.