The good news is fourth-quarter GDP set a blistering pace of 6.9% lifting 2021’s full-year growth to 5.7%. The bad news is the economy is running hot and exceeding growth expectations. Now the Fed has a clear path to boldly raise interest rates to fight inflation. Fed Chair Powell has indicated a drop in markets won’t cause him to reverse course this time, believing this strong trending economy can withstand a rate hike cycle without falling into a recession. The Goldilocks scenario is called a soft landing.
Bull|Bear Insights
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Following increased volatility in the third quarter, the last quarter of 2021 brought an unnerving amount of optimism in the markets especially considering sky-high inflation readings, a hawkish Fed announcing moves to eliminate easy monetary policy from the past 10+ years, and concerns over the Omicron COVID-19 variant surge. Virtually all sectors ended the year strong during the fourth quarter of 2021 and benefitted from a December “Santa Claus rally” once again. The S&P 500 Index rose 10.65% during the fourth quarter to end the year up 26.89%. The tech-heavy NASDAQ closed out the year with an 8.28% gain for the quarter, almost all of which occurred in the month of October. In contrast to other indices, the NASDAQ squeezed out a mere 0.69% return in December. Furthermore, as we write this commentary, it is clear that was just the beginning of relative underperformance in the technology sector that would continue into the early weeks of 2022. The Dow Jones Industrial Average ended the fourth quarter up 7.37% and 18.73% for the entire year.
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Inflation is a much more embedded problem than the Fed and politicians have been indicating. Shifts in the social system driving redistribution politics, the Fed’s easy monetary policy, and a pandemic have collided together to drive a very dangerous wave of wage and price inflation into the economic system. We have not seen this type of inflation set up since the 1970’s Stagflation crippled the U.S. economy.
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Traditional Wealth Management Approaches to Investing Aren’t Working Great for Clients or Advisors There are a few pieces of critical information that we need to…
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Bull|Bear InsightsQuarterly CommentaryQuarterly CommentaryWBI Insights
Volatility returns in Q3 as eyes remain on the Fed
Markets in Review After two quarters of rising equity markets through the beginning of this year, the third quarter brought increased volatility and flat to…
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