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!

January was a terrible month. Worries about economic damage from the Omicron wave were combined with the Fed’s perceived decision to start raising interest rates based on inflation levels at a 40-year high. Stocks were knocked down around the world. Tech stocks got hit especially hard, but even fixed income was down. It really was a terrible month.

Last week’s important economic data releases included January’s business confidence and employment reports. The January jobs report was a highlight, as it showed the economy added significantly more jobs than expected throughout the end of 2021 and start of 2022. Among the updates to come this week, the focus will be on international trade, consumer prices, and consumer sentiment.

Wow. I have rarely been so wrong about an economic report—or so glad to be wrong. And it wasn’t just me. The range of expected values for today’s jobs report was roughly between -400,000 and +250,000. Everyone was very wrong as it came in at +467,000. This was a much, much larger-than-expected gain, and it clearly shows there is something going on that analysts are missing.

The official jobs report comes out this Friday. Expectations are for another slowdown, with about 175,000 jobs added, down from 199,000 in December. With everything that is going on, especially the number of people who have the Omicron variant and are presumably not at work, that would be a great result. Unfortunately, the real number is likely to be well below that and will probably be negative—maybe significantly so.

Tensions between Russia and Ukraine are showing no signs of abating. The geopolitical implications of further escalation could be quite dire and complicated. Although the deadlock may be resolved through diplomacy, we are watching for the impact on asset prices if the conflict escalates. Energy and commodity markets could be in the immediate line of fire, but repercussions may also be felt in the region’s equity and fixed income markets. Finally, if the situation worsens, the ripple effects could be more broad-based and have an impact on global inflation expectations and monetary policy.

After a strong close to 2021, markets pulled back to start the year, with U.S. indices dropping between 3 and 10 percent. On the medical front, the Omicron wave continued. As case growth rose to new highs, consumer and business confidence took a hit. Finally, January reports showed inflation at a 40-year high, and the Fed announced a rate hike in March was very likely.

There were a number of important economic updates last week, with a focus on consumer confidence, the Fed’s January meeting, and the advanced estimate of fourth-quarter GDP growth. The first look at GDP growth in the fourth quarter was a highlight, as the report showed that the economic recovery picked up speed to finish out the year. This will be another busy week of updates, with reports on business confidence and January employment serving as highlights to come.

On February 1, China bids farewell to the Year of the Ox and rings in the Year of the Tiger. The ox symbolizes prosperity, diligence, and perseverance. In 2021, this symbol was apt, as Chinese economic policy shifted from “growth at all costs” to “common prosperity” and the country diligently persevered through many regulatory changes. Chinese equities were collateral damage in the process. As the Year of the Tiger rolls in, Chinese equities could remain volatile but purr stronger.

One of the key sources of uncertainty that has driven the market pullback over the past weeks has been interest rates. Specifically, the rise in rates—and the fear that the Fed would tighten further—pulled growth stocks down, including many in the tech sector, and generated significant uncertainty around where the economy was going.