Inflation Grinch

Jolly Markets

After most equity indexes traded back in the month of November, we are hopeful that December will be a jollier month for equities. December is historically a solid month for stocks so as of now, we’re optimistic that stocks will sidestep the news of the new variant. Over the weekend, the news was overall positive on the fact that the new variant might not be as severe as previous variants. No guarantee, but historically the S&P 500 has gained 1.5% on average in the month of December, which makes it the third-best month behind November and April. As you can see in the chart shown in the video for this vlog, December has historically been up over 74% of the time, which is more than any other month. Seasonality can be bullish this time of year, which is important right now with COVID and choppy economic reports causing uncertainty and volatility. We also know that usually the second half of the month is where we see the best performance. We’ve already seen some volatility in the first few trading days of December so we’re hoping that this month lives up to its reputation of being the jolliest month of them all.

Employment Data

The Grinch came out on the jobs report with the headline number of 210,000 jobs as opposed to the expected 550,000. The headline number looks bad, but when you dig a little deeper there’s good news behind it. Civilian employment numbers increased 1.1 million which was the strongest that we’ve seen in more than a year. The labor participation rate and the unemployment population are both at recovery highs. Despite the labor participation rate going up, unemployment is down to 4.2%. Average hourly earnings are up 4.8% year over year. Combine that with hours worked, and worker pay is up 9.4% year over year even outpacing inflation. The consumer may have some extra money in their pocket to endure the inflation that we may be seeing.

The Fed

Since this recovery and even before that, the Federal Reserve, the market, and individuals have been much more focused on jobs than inflation. It has been decades since we’ve really had to worry about inflation. The jobs verse inflation mentality seems to have flipped. The Core CPI and the headline Consumer Price Index come out this Friday and that’s important because it’s five days before the next FOMC meeting. The Fed will have time to digest that information before they present the report on how quickly they may be reducing bond-buying, which has been very stimulative for the markets. This jobs data, which may have disappointed in the past, would have been a little bit bullish. We just seen stocks pop because that would have meant the Fed may have backed off their easing. Instead, we saw the stocks rollover because it appears the Fed is no longer singly focused on jobs. It sounds bad when you hear the word inflation but we’re in a strong position when it comes to corporate America. A chart shown in the video for this vlog is very informative and shows that the level of cash in corporate America is near record highs and considerably higher than it was last time we were dealing with inflation, which is the late 70s, early 80s. Corporate America has a lot bigger cushion where they can absorb some of these price increases. The average American doesn’t go out and buy rebar steel, they buy stuff that corporate America turns basic goods into. So, there may be some cushion there before it gets all the way to the consumer, where some of these cost increases can be split and if it doesn’t sustain itself year after year. We are seeing cash levels go down but we’re far away from where cash flows become concerning.

Technical Analysis

We saw volatility reappear in the overall markets last week. The S&P 500 closed on Friday at a price of 4,538 giving us a new resistance level of 4,570 and a new support level of 4,510. December historically has been a strong month for the markets, and we’ve seen some evidence of that with the 200-day moving average, which is over the 4,300-price level. While seeing this volatility, we’ve also seen strength from a long-term standpoint and hope to continue the strength to the end of the year and heading into 2022.


Greg Powell, CIMA®
President and CEO
Wealth Consultant
Email Greg Powell here

Bobby Norman, CFP®, AIF®, CEPA®
Managing Director
Wealth Consultant
Email Bobby Norman here

Trey Booth, CFA®, AIF®
Chief Investment Officer
Wealth Consultant
Email Trey Booth here

Adam Vansant, AIF®, BFA
Vice President
Wealth Consultant
Email Adam Vansant here

Ty Miller
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.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Economic forecasts set forth in this presentation may not develop as predicted.

No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.

Securities and advisory services offered through LPL Financial, Member FINRA/SIPC and a registered investment advisor.

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