We hope everyone is looking forward to a great holiday with family and friends. As always there are topics to discuss in the markets, as volatility has spiked as there was a batch of negative headlines over the weekend that we want to address. To start, in our first vlog of December, we covered how the markets are historically strong in the last two trading weeks of the year. However, that has not played out so far. The Fed is currently on a more aggressive, less market friendly path and there are new things that are feeding the volatility. The new COVID variant is causing issues around the world, and over the weekend, press released that President Biden’s Build Back America plan was voted down. While the president’s plan would have been great for spending in our economy, critics of the plan argue that it would have probably made the inflation problem even worse. While many see this as a negative development for economic growth, we believe that it’s also important to remember that this should be a plus for corporate profits with the absence of new tax increases in 2022 and 2023.
The Fed’s Plan
The December 15th meeting by the Fed was much anticipated and as anticipated, they moved the markets. The markets shot up that day, but the two subsequent days took a little bit of a dip. Their plan, now, is to accelerate their tapering and end by March. This gives them the possibility of starting rate hikes as early as May 2022. Fed Chairman, Mr. Powell outlined that he may be looking at doing three possible rate hikes next year. That’s an increase as the initial expectation was one rate hike. However, we do want to stress how Mr. Powell has shown in the past that he’s flexible. If the time comes, and he feels that it’s not needed he has shown his ability to adapt. We are hoping that he keeps that characteristic in the future, when needed. On a more positive note, the Fed would not do this if they weren’t seeing some positive signs in the economy, the job market, and other areas. The reason for tapering is to decrease inflation and cool down an overheated economy. They’re estimating a 4% GDP growth next year and inflation back down to 2.6% and then back to around 2% after that, so it’s not all bad news when it comes to the Fed.
We saw some emotion come back into the markets last week which causes the volatility that we saw but, even with that said, the SP&P 500 closed Friday at a price of 4,620. That makes our resistance level 4,650 and the support level 4,590. We have a short week this week and next so, we hope to make up some ground. The 50-day moving average for the S&P 500 is still currently over 4,600. We hope that we get a bounce back here at the end of the year, maybe even a rally, that can send us into a positive momentum to start 2022.
Bobby Norman, CFP®, AIF®, CEPA®
Email Bobby Norman here
Adam Vansant, AIF®, BFA™
Email Adam Vansant here
Associate Vice President
Email Ty Miller here
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
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