A Week In Review – Market Snapshot Dec 23 2021
Below is a recap for the week ending December 23rd, 2021 and a summary of what to look out for this week, courtesy of Sun Life Investments.
Week in Review: Markets Stay Volatile Amid Headwinds
- Outlook clouds for additional US stimulus
- As Omicron spreads, responses vary
- European energy prices extend surge
- Record US buybacks show no sign of letup
- China cuts rates
Global equities ended higher on the Christmas week. The yield on the US 10-year Treasury note rose to 1.46%. The price of a barrel of West Texas Intermediate crude oil rose to $73.20 as the Volatility Index (VIX) declined to 18.6.
MACRO NEWS
Outlook clouds for additional US stimulus
News that US Senator Joe Manchin (D, WV) would not support President Joe Biden’s Build Back Better package of social and climate programs has clouded the outlook for additional fiscal stimulus in 2022. Cost of the Biden plan are estimated between $3 and $4.5 trillion, Manchin said he would not support the bill. Efforts are now underway to produce a slimmed-down program, though that plan could run into opposition from the progressive wing of the Democratic Party.
As Omicron spreads, responses vary
Given that lockdowns have largely proven expensive and relatively ineffective in controlling the spread of the coronavirus, many governments are trying to avoid taking the most severe steps to restrain the spread of the Omicron variant. Harsher restrictions have been undertaken in many European countries. Concerns are growing that a fresh wave of the virus in China could further tangle global supply chains but on a brighter note, two studies released suggest the Omicron variant tends to result in markedly lower risk of hospitalization than earlier variants.
European energy prices extend surge
With 30% of France’s nuclear power generation capacity expected to be offline for unexpected maintenance and natural gas supplies from Russia limited, European energy prices surged to record highs. Second round effects are feared as rising input costs for things such as fertilizers could raise food prices for European consumers down the road while rising heating and lighting bills could put a big dent in consumers’ discretionary income, hampering the recovery from the pandemic.
Record US buybacks show no sign of letup
Thanks to solid corporate cash flows, share buybacks and dividend increases are expected to accelerate in 2022, the Wall Street Journal reports. In 2021, repurchases by members of the S&P 500 are expected to reach $850 billion, up 16% from prepandemic levels. A proposed 1% excise tax on share repurchases would not dissuade continued buybacks, companies said.
China cuts rates
Amid slowing economic growth, the People’s Bank of China this week cuts its one-year loan prime rate by 0.05%. While the magnitude of the reduction is small, analysts contend the signal the cut sends, along with other measures being undertaken to support the economy, is a powerful one and to expect additional cuts in 2022.
QUICK HITS & EARNINGS NEWS
- The US Federal Reserve’s favorite inflation measure, the core personal consumption expenditures price index, rose 4.7% in November, more than double the central bank’s 2% target.
- The US Walter Reed Army Institute of Research revealed it has developed a vaccine that it believes will be effective against COVID-19 and all its variants.
- Turkish President Recep Tayyip Erdogan unveiled a lira rescue package to incentivize bank depositors to keep their deposits in the Turkish banking system. The move resulted in a 15% short-covering rally in the beleaguered currency.
- To stimulate flagging economic growth, Japan’s Diet enacted a $315 billion supplemental budget.
- Due to the effects of the pandemic, the US population rose a record-low 0.1% in 2021. The pandemic also took a heavy toll on life expectancy, the sharpest decline since World War II.
- The British economy grew 1.1% from the prior quarter in Q3, a downward revision from an earlier 13% estimate.
- The US Food and Drug Administration granted an emergency use authorization for Pfizer’s COVID-19 pill Paxlovid, the first medication that patients can take at home.
- US existing home sales rose 1.9% in November, the fastest pace since January.
- The global mergers and acquisitions boom continued in 2021 with a record $5.7 trillion in deals struck through 21 December.
