John Hancock: Weekly Market Recap Week Ended December 17th

Hawkish pivot

As expected, the U.S. Federal Reserve accelerated the pace at which it will phase out its pandemic-era program that’s been purchasing $120 billion in bonds each month. The Fed taper is now expected to end by March 2022 instead of next June. In addition, most Fed officials now see three interest-rate increases as likely in 2022, up from the single increase that had been projected a few months ago.

2021 earnings

Entering the final two weeks of the year, projections from Wall Street analysts indicate that 2021’s earnings growth rate for S&P 500 companies could reach 45%. If that year-over-year forecast is achieved, it would mark the highest annual growth rate since FactSet began tracking this metric in 2008. Over the past 10 years, growth has averaged 5%.  

Retail recovery

Although U.S. retail sales rose at the start of the holiday shopping season, the latest monthly gain fell short of the previous month’s strong result. Sales at U.S. retail stores, online sellers, and restaurants rose by a seasonally adjusted 0.3% in November from the previous month. In October, sales jumped 1.8%.

Policy shifts elsewhere

The U.S. Federal Reserve wasn’t the only major central bank to announce a policy shift in response to inflation concerns. The Bank of England raised its key interest rate on Thursday, becoming the first major central bank to do so during the pandemic. Some central banks in Eastern Europe and Latin America also lifted rates, but their counterparts in southeast Asia left theirs unchanged.

Source: https://wmr.jhinvestments.com/