Now that we’re two years into the pandemic, analysts have a lot more context than we did at the start. We have seen multiple waves of the virus, have watched the economy react in real time, and have a sense of what the policy responses are likely to be. As such, we could look back on history for some guidance as to what was likely to happen with the winter Delta wave—and that guidance by and large worked.

The panic of the day is the news about interest rates. The headlines state (correctly) that rates have moved up sharply in recent days. They state (correctly) that stocks have pulled back, noting this fact is due to that increase (which is possibly but not necessarily true). And they state (incorrectly, I believe) that higher rates are going to derail the economy and the markets, in that order.

The year 2021 was all about supply shortages—from semiconductor chips to construction materials and everything in between. As supply chain logjams ease in 2022, some goods will get back to a normal balance. Others may swing to an oversupply. Sectors and industries that benefit from economic activity in which supply rises to meet demand may continue to reward investors in the near term. The business cycles for some companies may be at or near peak, however, so investors must watch for potential signs of a downturn. 

We are just starting earnings season, when companies will be reporting how much money they made in the fourth quarter of last year. This is always an important time, as stock values depend crucially on how much money companies make. But this season will be especially important.

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.

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.

For the third year in a row, Commonwealth sponsored the Massachusetts Conference for Women. Since 2005, this annual conference has been providing connection, motivation, inspiration, networking opportunities, and skills-building workshops for thousands of women. As we did in 2020 and 2019, my colleague Giovanna Zaffina and I are sharing our experiences and thoughts.

Is it possible we can learn something about a healthy economy from the National Forest Service (NFS)? For decades, the forest service had a policy of extinguishing brush and wildfires at all costs. Its main goals were to prevent fires and to suppress them as quickly as possible if they started. Over time, however, the NFS came to realize that forest fires have a role in nature, one that is necessary for healthy ecosystems to take form. The same may be true for recessions and the long-term health of our economy.