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Investment Ideas 2022: Explore three key themes dominating markets where investors might uncover potential opportunities. Read More

   
MARKET MONITOR 
|
December 17

MARKET MONITOR | December 17

Chart of the Week


RATES

For the first time in recent history, the Federal Reserve (Fed) is attempting to thread the needle of persistently-high inflation and economic support. Last week, they announced an accelerated taper of asset purchases to $30bn/month, concluding by March. Accordingly, we now forecast rate hikes in March, June, and September of 2022, with three per year after that.

Source: Federal Reserve Economic Data and Goldman Sachs Asset Management.

Market Summary


GLOBAL EQUITIES

Global equities performance was mixed last week. In the US, the S&P 500 saw volatile trading going into last week’s FOMC meeting, ultimately ending -1.91% lower amidst tech weakness. In Europe, the STOXX 600 fell -0.34% as the European Central Bank’s (ECB) continued dovish policy, although the FTSE 100 in particular fell -0.29%. Meanwhile, the TOPIX rose 0.46% last week. Read More

COMMODITIES

Oil prices fell last week, with supply-demand mechanics overcoming a weaker US dollar. The Omicron variant cases and concerns have weighed on oil demand, even as OPEC remains optimistic about eventual recovery. Meanwhile, US crude inventories drew down 4.58 million barrels. In total, Brent and WTI ended last week at $73.52 and $70.86 per barrel, respectively. Gold prices were flat at $1,805 per troy ounce. Read More

FIXED INCOME

Monetary policy was at the forefront of economic news last week with major central banks taking increasingly divergent paths. Bifurcation was not just limited to banks, but also to maturities. 2-Year Treasuries and 2-Year Gilts stayed relatively flat, finishing at 0.64% and 0.51%, respectively, reflecting monetary policy tightening. Longer-dated maturities dipped, with 10-Year Treasuries ending at 1.40%, down -9 bps. The move to safety reflects fears about slowing long-term growth driven by an extended pandemic and a higher inflation-baseline. Read More

FX

The US dollar lost some of its recent momentum, with a moderated past week. The foreign exchange market largely anticipated the Fed’s hawkish evolution, while appearing more surprised by the Bank of England’s (BoE) rate hike. Ultimately, the US dollar index finished up 0.49% and the pound finished at $1.3251. Read More

Economic Summary


POLICY

The Fed doubled its tapering pace, reflecting the growing pull of price stability within its dual-mandate. It was broadly in line with consensus, as was their dot plot showing multiple rate hikes in 2022. While the UK has tightened restrictions in response to the Omicron variant, the BoE raised the Bank Rate to 0.25%. In contrast, the ECB kept rates unchanged, but announced a reduction in PEPP purchases, ultimately to end in March. The new staff projections still point to a 2024 baseline for the first rate hike, despite significant upward revisions to inflation. Read More

INFLATION

US PPI rose 9.6% YoY in November, the most on record, and above consensus of 9.2%. Core PPI also hit a record of 7.7% YoY, suggesting that higher input prices such as crude materials may be passed onto consumers. Meanwhile, November’s UK CPI print of 5.1% YoY was above consensus, and the highest level since September 2011.   Read More

LABOR

Progress in the US labor market slowed, with initial jobless claims rising up to 206k for the week ending December 11, from 184k the week prior. That said, the four-week moving average reached a five-decade low of 204k. Read More

Style Performance


US Equity Size & Style Returns

MONTH-TO-DATE

Large
3.22%
0.87%
-1.15%
Medium
2.40%
0.47%
-2.83%
Small
0.39%
-1.07%
-2.48%
Value
Core
Growth

YEAR-TO-DATE

Large
21.52%
22.59%
23.52%
Medium
23.66%
18.32%
9.16%
Small
23.72%
11.11%
-0.16%
Value
Core
Growth

MSCI World Size & Style Returns

MONTH-TO-DATE

Large
3.91%
1.37%
-0.95%
Medium
2.62%
0.75%
-1.53%
Small
1.42%
0.02%
-1.38%
Value
Core
Growth

YEAR-TO-DATE

Large
18.73%
19.20%
19.20%
Medium
18.17%
13.93%
8.62%
Small
16.91%
11.65%
6.28%
Value
Core
Growth

US Fixed Income Maturity and Quality Returns

MONTH-TO-DATE

Government
-0.15%
-0.04%
-0.26%
Corporate
-0.01%
0.15%
-0.23%
High Yield
0.73%
1.11%
1.51%
Short
Intermed.
Long

YEAR-TO-DATE

Government
-1.10%
-1.50%
-3.52%
Corporate
-0.55%
-1.00%
-0.94%
High Yield
5.39%
4.25%
8.15%
Short
Intermed.
Long

European Fixed Income Maturity and Quality Returns

MONTH-TO-DATE

Government
-0.11%
0.11%
0.55%
Corporate
0.16%
0.73%
1.53%
High Yield
0.85%
??????
??????
Short
Intermed.
Long

YEAR-TO-DATE

Government
-0.52%
-0.78%
-3.38%
Corporate
0.13%
0.01%
-1.78%
High Yield
3.41%
??????
??????
Short
Intermed.
Long

Source: Bloomberg and Goldman Sachs Asset Management (as of 12/17/21)

VIEW LESS DISCLOSURE

Key Economic Releases


Monday, Dec 20

Tuesday, Dec 21

GfK Consumer Confidence (Cons: -2.7, Prior: -1.6)

Wednesday, Dec 22


Thursday, Dec 23

US Personal Income (Cons: 0.5%, Prior: 0.5%)
US Jobless Claims (Cons: 205k, Prior: 206k)
US Core PCE YoY (Cons: 4.5%, Prior: 4.1%)

Friday, Dec 24

NYSE Holiday – Christmas

VIEW LESS DISCLOSURE

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