Hello Eagle Wealth Community,
Financial markets can be challenging to understand. But when markets enter a “bad news is good news” cycle, it becomes even more difficult to follow along.
At its November meeting, the Fed outlined its plan to taper monthly bond purchases, which will end this pandemic-era policy response by July 2022.1
Bad news, right? Bond purchases were one of the ways the Fed supported the economy. Stopping the program would be like removing the punchbowl just as the party was getting going.
Not so fast. This time around, the financial markets said that bad news was good news. Ending the program signaled that the Fed had confidence in the economic recovery, and it no longer needed to support the financial markets.
But just a month ago, the bad news was still bad news. The financial markets hit a rough patch in late September after the Fed said it was preparing to reduce its bond-buying program as soon as November.2
If you have been investing for any period of time, it should come as no surprise to hear that the financial markets changed their mind. While this sort of volatility makes for absorbing cable news, it can also leave investors with an uneasy feeling. In any long-term investment lifecycle, there will be some roller-coaster weeks. What can you do to ease the stress? Surround yourself with a good support system and information you can trust.
Understanding a few key investment principles can be a great place to start. Check out our guide on the Seven Principals of Long-Term Investing. It can give you a better framework to understand the information as you take in the ideas, as well as offer context for evaluating concepts and strategies.
The truth is, by working with a financial team, you’ve already taken steps to create an overall financial strategy built to weather-changing circumstances. So remember, we’re here to help you stay focused on your investing goals while the financial markets sort out what’s good news and what’s bad.
Until next week,
Your Eagle Wealth Team
The Week on Wall Street
Stocks posted small declines last week as investors digested recent stock market gains and an unexpectedly high inflation read.
The Dow Jones Industrial Average slid 0.63%, while the Standard & Poor’s 500 retreated 0.31%. The Nasdaq Composite index slipped 0.69% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, dropped 0.78%.1,2,3
Market Takes a Pause
After moving higher on Congressional approval of a $1 trillion-plus infrastructure spending bill, stocks drifted lower as investors took a breather after a weeks-long run-up in prices. A high October inflation report on Wednesday sent bond yields higher and stock prices lower, especially technology and other high growth companies. Energy also fell.4,5
Higher-than-expected inflation elevated investor worries that the Fed may be forced to accelerate its bond tapering schedule and hike interest rates sooner than planned. Stocks found firmer footing following the inflation-related sell-off, closing the week on a strong note, though it wasn’t sufficient to keep stocks from ending the week in the red.
Hot! Hot! Hot!
Rising prices appear to be showing no signs of moderating. The first reading on inflation was Tuesday’s release of the Producer Price Index, which saw wholesale prices rise 0.6% in October and register an 8.6% increase from 12-months ago.4
A day later the Consumer Price Index came in above consensus estimates, with prices climbing 0.9% from September 2021 and increasing 6.2% year-over-year. The 12-month increase was the sharpest such rise since 1990. The 12-month core inflation rate (excludes the more volatile food and energy sectors) was 4.6%, the fastest pace since 1991.5
THE WEEK AHEAD
Key Economic Data
Tuesday: Retail Sales. Industrial Production.
Wednesday: Housing Starts.
Friday: Jobless Claims. Index of Leading Economic Indicators.
Source: Econoday, November 12, 2021
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
Companies Reporting Earnings
Monday: Lucid Group (LCID).
Tuesday: Walmart, Inc. (WMT), The Home Depot, Inc. (HD), NetEase, Inc. (NTES).
Wednesday: Nvidia Corporation (NVDA), Cisco Systems, Inc. (CSCO), Target Corporation (TGT), Lowe’s Companies, Inc. (LOW), The TJX Companies, Inc. (TJX).
Thursday: Palo Alto Networks, Inc. (PANW), Ross Stores, Inc. (ROST), JD.com (JD).
Source: Zacks, November 12, 2021
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.