Weekly Market Update

Author : Rachel Poole
Date : December 18, 2021

Global Market News

Global equities tumble
Global equities were down on the week. The S&P 500 and Dow Jones closed the week down 1.94% and 1.68%, respectively, while the Nasdaq dropped 2.95%. The yield on the US 10-year Treasury note decreased several basis points to 1.40%, and the price of a barrel of West Texas Intermediate crude oil also decreased, ending the week at $70.42. Volatility, as measured by the CBOE Volatility Index, ticked up to 21.5.

Fed indicates accelerated tapering and rate hikes for 2022
On Wednesday, the Federal Reserve announced it is making plans to accelerate the reduction of its monthly bond purchases, tapering by $15 billion in November and doubling down in December. The Fed also indicated that it sees as many as three rate hikes in 2022. The Federal Open Market Committee (FOMC) increased its inflation outlook for 2021 from 4.2% to 5.3% for all items, while it also bumped up its 2022 expectation for core inflation to 2.7%. Fed officials also revised growth estimates upward for 2022, predicting 4% growth. Markets reacted positively to the announcements coming from the Fed, but it wasn’t enough to offset the decline in equities for the week.

Updated Market Figures

Coronavirus Updates

Covid-19 by the numbers
Global Confirmed Covid-19 cases: 273,000,000 Global Covid-19 deaths: 5,340,000
US Confirmed Covid-19 cases: 40,600,000 US Covid-19 deaths: 803,000
*As of Friday evening

Fauci recommends boosters, Vaccinations severely lag in Africa
As the Covid-19 Omnicron variant continues to spread and is close to surpassing the Delta variant to become the dominant variant in Europe, White House chief medical advisor Dr. Anthony Fauci says the two-dose vaccination series from Pfizer and BioNTech is compromised by omicron, but that they still offer significant protection against severe disease. Because of this, the White House is recommending all who are eligible to get a booster shot. On the other side of the world, African countries are struggling to get their populations vaccinated. Many of the world’s wealthy countries have met the 70% vaccination target, while only 20 African countries have fully vaccinated at least 10% of their populations. The World Health Organization estimates the continent will not reach 70% vaccination status until 2024.

International Developments

Moscow publishes list of demands for NATO
Moscow has published a list of demands for North Atlantic Treaty Organization (NATO) countries, escalating tensions with Europe and the US in particular. Included in Russia’s list of demands are guarantees that Ukraine will never join NATO and that NATO will end its military activities in Ukraine, Eastern Europe, the Caucasus, and Central Asia. Moscow’s foreign ministry said it was ready to negotiate and had a senior Russian envoy prepared to immediately depart for talks. The list of demands came shortly after leaders from the US and European Union threatened “massive consequences” for Russia’s continued military buildup near its border with Ukraine. US intelligence officials say Russia has moved 170,000 troops to the border and is preparing for a possible invasion early next year. Also this week, Chinese leader Xi Jinping affirmed China’s ties with Russia following a virtual meeting with Russian President Vladimir Putin.

Turkish lira plunges to new lows
The Turkish lira plunged to new lows this week as investors’ concerns of Turkish President Recep Tayyip Erdogan’s risky monetary policy heighten. Turkey’s inflation rate soared to more than 21% in November alone, having devastating effects on the country’s import-reliant economy. President Erdogan’s monetary policy approach is unorthodox in the sense that he believes higher interest rates cause inflation, rather than prevent it. Therefore, in response to rising inflation, Turkey’s central bank cut interest rates by 100 basis points. The lira has since plunged, hitting a low of 15.68 to 1 USD.

US Social & Political Developments

Blinken promotes a “Free and open Indo-Pacific”
While traveling to Indonesia, Malaysia, and Thailand, US Secretary of State Antony Blinken has been promoting a “free and open Indo-Pacific.” During a press conference in Jakarta, Blinken affirmed Washington’s commitment to strengthening its military and economic relationships in the Indo-Pacific region. He said the US is working on an economic framework for the region that would enhance the digital economy, clean energy, and infrastructure, among other areas. Instead of promoting U.S.-China competition, Blinken simply warned of China’s aggressive actions in the South China Sea and called for a region that is “free from coercion.”

Build Back Better bill stalls in the Senate

President Joe Biden’s signature spending bill, the “Build Back Better” plan, has stalled in the Senate. While it initially looked like it would pass through the Senate before the holidays, Democrats have been unable to convince Democratic Senator Joe Manchin of West Virginia to support the legislation. A feature of the budget process, known as reconciliation, would allow Democrats to avoid a Republican filibuster and pass the bill with a simple majority, but it requires unanimous support from within the party. Now, it is unlikely the bill will pass before the holidays.

Corporate/Sector News

Apple reportedly building team to produce wireless chips in-house
According to a report from Bloomberg, Apple is building a new team in Southern California to produce wireless chips in-house. The chips developed and produced by this new team of engineers could potentially replace components supplied by Broadcom Inc. and Skyworks Solutions Inc. After Bloomberg reported on this development, shares of wireless-chip makers, including Skywork and Broadcom, dropped several percentage points. Apple’s move is part of a broader strategy to make more of its own components.

Shares of Harley Davidson soar after electric motorcycle announcement
Harley Davidson’s stock price increased as much as 14% on Monday after the company announced its plans to merge its electric motorcycle division with SPAC AEA-Bridges Impact Corp. The $1.77 billion deal would result in the first publicly traded electric vehicle motorcycle company in the US and Harley Davidson would retain a 74% stake in the new company. The new company, to be named LiveWire (LVW), aims to launch multiple electric motorcycles.

Google mandates vaccines and requires workers to come back to the office in 2022
At some point in 2022, Google will require its workers to come back to the office for at least three days per week even though many other tech companies continue to roll back return-to-work plans. The company also has plans to double down on vaccination statuses. According to internal documents viewed by CNBC, Google has told employees they will lose pay and will eventually be fired if they do not get vaccinated. While workers can request exemptions for religious beliefs or medical conditions, there will be no option for frequent testing in place of vaccination.

Image of the Week

Video of the Week

Kentucky Man Plays Piano in home Destroyed by Tornado
Source: The New York Times