Last week the market was like a bucking bronco at the local rodeo and that trend could well continue as market pundits are eyeing this week’s Federal Reserve policy meeting in which inflation and omicron will be at the top of the agenda. After the omicron selloff investors came off the sidelines in what CNBC’s Jim “Mad Money” Cramer described as a scramble to get back in after the omicron overreaction. Then the inflation report came out Friday and its becoming clear that rising prices are hitting the pocketbooks of middle America.
The Dow last week gained a net 216 points or 0.6% on slightly higher trading volume but IBD now lists markets in correction mode and early action for this week is further indication that caution is the order of the day. At the close on Monday the Dow was down 320 at 35,650 on heavier trading volume.
The Economy and Earnings
Inflation in the US, as measured by the CPI, hit a 40 year high as gas, shelter, food and vehicles contributed to the higher reading. Rents make up 30% of the CPI and were up 0.4%. Rent increases are noteworthy since they are indicative that inflation is becoming persistent. The CPI is now running at a 12 month pace of 6.8%. prompting Federal Reserve Chairman Powell to possibly shift gears and speed up plans to fight rising prices. The first step expected by Wall Street will be for the Fed to slow down asset purchases more than previously announced and the second inflation fighting step will occur next year where gurus are now expecting the Fed will raise interest rates at least two or three times.
US investors are taking note of a shift in policy by the Chinese gubment toward home grown tech companies. The new economic order from the CCP shows a concern for control of data and capital flows vs economic liberalization and reforms. This all began in 2020 when Jack Ma’s Ant Group was forced to cancel its IPO. Then efforts turned to data security as large fines were levied against Alibaba and others. China is now said to be drawing up a blacklist that will make it harder for startup tech companies to circumvented local investment restrictions and raise foreign capital. The bottom line here is that Chinese tech stocks are caught in a tug o war between the CCP and the US as each side moves to protect sovereign interests.
Items of Interest
As the Scout tree lot enters its final week, sales are down from prior years due to a variety of factors like higher prices and people being able to leave home for the holidays. We are hearing that other tree lots in the area are experiencing the same issue with sales running about 20% lower than last year. Through it all the scouts are coming out of their lockdown shells and discovering the joys of helping people find a tree all while being wet, cold and tired. Hats off to the leadership of the tree lot who has endured restrictions and limitations of all kinds but has still managed to put together another successful fundraiser for the troop.
This coming weekend Greystone will move to its new office in Kirkland. We are excited for this as we have outgrown the Ballard office. Monday will be our first day in the new digs.