My colleague Sam Millette, manager, fixed income on Commonwealth’s Investment Management and Research team, has helped me put together this month’s Market Risk Update. Thanks for the assist, Sam!

My colleague Sam Millette, manager, fixed income on Commonwealth’s Investment Management and Research team, has helped me put together this month’s Economic Risk Factor Update. Thanks for the assist, Sam!

This morning’s jobs report came out, and we have all seen the data. Job growth is down, but the unemployment rate is also down. Hiring is weak, but more people have jobs. This makes perfect sense, not. What’s going on here?

After yesterday's monthly looking back/looking ahead post, I had a request to do the same thing for 2021 and 2022. While I haven’t taken this approach in the past, it seemed like a good idea to bring this format to the 2022 outlook in the context of 2021. So, let’s take a closer look.

December was a solid month for both the economy and the markets but a difficult month for medical news. The Omicron wave of the COVID-19 virus drove new case counts to all-time highs at year-end. Job growth kept improving, however, and consumer confidence and spending also continued to grow. Business confidence and investment remained strong, and the markets reacted to the positive news. The economic news continued to be strong through year-end, although we should note it was based on backward-looking data. The outlook for January is more mixed. The Omicron wave is likely to start showing up in the economic data. It’s quite possible it will also influence the markets.

The year closed on a strong note, with the Dow and S&P showing gains. The Nasdaq struggled a bit, but it ended December in the green. On the medical front, the omicron variant drove COVID cases to new highs. Still, the economic data kept getting better. Consumer confidence numbers bounced back, and consumer spending kept growing. Further, business confidence and investment remain very high.

As we close out the new year, it has been one to remember. Or, possibly, better to forget. In my own case, we had planned on having friends over for the evening. But, unfortunately, one was exposed to COVID, and then we found out late this morning that we had been exposed to COVID as well. This far, all the tests are negative—so wish us luck. But the risks are definitely on my mind at the moment.

It has been going on two months since we last took a detailed look at the pandemic. Of course, a lot has happened since then. Between the winter wave of Delta, the emergence of Omicron, and the rising hospitalizations putting regional health care systems at risk again, there is a concern as to whether we are entering a third pandemic. I don’t think so, at this point. But let’s take a detailed look at where we are now and at the real question going forward—how bad will this get?

Over the past month, we have done a couple of posts about ESG investing, notably from my younger colleagues. I have gotten—not pushback, really—but comments to that effect both on the blog and elsewhere. The feeling seems to be, at least to some extent, that ESG is different from what prior generations, which is to say old people (which is to say me), have looked at and that somehow this represents a change.

My colleague Sam Millette, manager, fixed income on Commonwealth’s Investment Management and Research team, has helped me put together this month’s Market Risk Update. Thanks for the assist, Sam!