Insight

February Market Update

At TM3 Wealth, it is important to us that you are well informed about what is happening in the markets. […]

At TM3 Wealth, it is important to us that you are well informed about what is happening in the markets. Here are a few of the key topics of conversation that we feel deserve the most attention this month. If you have any questions or would like to continue the conversation, let us know, and we appreciate the opportunity.

Inflation notched up AGAIN in January with the Consumer Price Index showing prices increased 7.5% over the past year and 0.6% over December[1]. While the price increases were broad-based across the economy, energy, food, and rents continue to push the index higher. Core inflation, which excludes food and energy, rose 6.0% and previously quiet categories, such as medical services, rose.  This is perhaps the most emphatic data point that points toward more aggressive Fed interest rate intervention.

Following the inflation report, market volatility ticked up substantially on concerns about monetary policy and the upcoming Federal Reserve meetings. With the next Fed meeting in mid-March, the market is expecting either a 25 or 50 basis point hike in the Fed’s target rate coming out of that meeting. Looking across the remainder of the year, the market is expecting a rate increase in six of the seven remaining Fed meetings[2].  That being said, raising rates that many times in an election year will be tough to accomplish.

Inflation continues to plague consumer sentiment, which caused the University of Michigan’s Consumer Sentiment Index to drop over 5 points to 61.7 in February[3]. Expectations around the future state of the economy fueled the downward move, though feelings on current conditions also fell.  Interestingly, this may be a case of “bad news is good news” since the Fed closely watches this data to determine how much of a rate increase the investing public may tolerate.

In positive news, the jobs market provided a nice surprise in January with 467,000 jobs being added to the economy[4], well above the 125,000 that was expected by economists according to a Bloomberg survey. Also, the past few months’ figures were updated to reflect the 709,000 more jobs that were added to the economy, showing that hiring momentum was stronger than thought over the past couple of months. While the unemployment rate did slightly increase to 4.0% from 3.9%, that was largely due to an increase in the labor force participation rate, which rose to 62.2%[5].  In other words, people who had not been looking for work are now being enticed into the job market by higher wages.

Finally, markets continue to monitor the situation in Ukraine amid conflicting reports of Russian troops withdrawing from the border while NATO said the military buildup has continued.  While an invasion would not necessarily constitute a long-term problem for global economics, it could cause substantial price volatility in oil and gas… and stoke potential issues with Russia’s ally China.

The bottom line: There isn’t a great way to sugarcoat this, but we expect equity markets to remain volatile through the first half of 2022 due to Fed interest rate activity.  Although bonds face headwinds as interest rates rise, they’ve historically played an important role in limiting risk.  In periods like this, a well-diversified portfolio can be your best friend.

Disclosures

The material presented includes information and opinions provided by a party not related to Thrivent Advisor Network. It has been obtained from sources deemed reliable; but no independent verification has been made, nor is its accuracy or completeness guaranteed. The opinions expressed may not necessarily represent those of Thrivent Advisor Network or its affiliates. They are provided solely for information purposes and are not to be construed as solicitations or offers to buy or sell any products, securities, or services. They also do not include all fees or expenses that may be incurred by investing in specific products. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. You cannot invest directly in an index. The opinions expressed are subject to change as subsequent conditions vary. Thrivent Advisor Network and its affiliates accept no liability for loss or damage of any kind arising from the use of this information.  

Investment advisory services offered through Thrivent Advisor Network, LLC., a registered investment adviser and a subsidiary of Thrivent.  Clients will separately engage a broker-dealer or custodian to safeguard their investment advisory assets.  Review the Thrivent Advisor Network ADV Disclosure Brochure and Wrap-Fee Program Brochure for a full description of services, fees, and expenses. Thrivent Advisor Network LLC advisors may also be registered representatives of a broker-dealer to offer securities products.

This communication may include forward looking statements. Specific forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and include, without limitation, words such as “may,” “will,” “expects,” “believes,” “anticipates,” “plans,” “estimates,” “projects,” “targets,” “forecasts,” “seeks,” “could’” or the negative of such terms or other variations on such terms or comparable terminology. These statements are not guarantees of future performance and involve risks, uncertainties, assumptions and other factors that are difficult to predict and that could cause actual results to differ materially.

Index Benchmarks presented within this report may not reflect factors relevant for your portfolio or your unique risks, goals or investment objectives. Past performance of an index is not an indication or guarantee of future results. It is not possible to invest directly in an index.

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas. Average price data for select utility, automotive fuel, and food items are also available.

The Michigan Consumer Sentiment Index (MCSI) is a monthly survey of consumer confidence levels in the United States conducted by the University of Michigan.  

TM3 Wealth is a part of Thrivent Advisor Network, LLC (“Thrivent”), a Registered Investment Adviser (“RIA”), located in the State of Minnesota. Thrivent provides investment advisory and related services for clients nationally. Thrivent will maintain all applicable registration and licenses as required by the various states in which Thrivent conducts business, as applicable. Thrivent renders individualized responses to persons in a particular state only after complying with all regulatory requirements, or pursuant to an applicable state exemption or exclusion. ​

Advisory Persons of Thrivent provide advisory services under a practice name or “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser.  TM3 Wealth and Thrivent Advisor Network, LLC are not affiliated companies. Information in this message is for the intended recipient[s] only. Please visit our website www.tm3wealth.com for important disclosures. ​

[1] Source: US Bureau of Labor Statistics, https://www.bls.gov/news.release/cpi.nr0.htm

[2] Source: CME FedWatch Tool, latest as of February 14, 2022

[3] Source: University of Michigan, http://www.sca.isr.umich.edu/

[4] Source: US Bureau of Labor Statistics, https://www.bls.gov/news.release/empsit.nr0.htm

[5] Source: US Bureau of Labor Statistics, https://www.bls.gov/news.release/empsit.nr0.htm

Related Insights