The Long and Short of it, week ending 07 Jan 2022

Publication Type: Market Commentaries

Starting the new year strong, with the S&P 500 Index and the Dow Jones Industrial Average setting
new records, stock prices reversed course, propelled by the release of FOMC minutes Wednesday,
and headed lower the remainder of the week. The FOMC minutes revealed Fed governors were
more concerned about inflation than estimated and were considering not only a faster tapering pace
– leading to sooner-than-expected rate increases – but also were contemplating reducing the Fed
balance sheet concomitant with rate increases. The minutes pushed 10-year U.S. Treasury rates
higher and facilitated the rotation from tech/growth stocks into cyclical/value stocks with the Nasdaq
Composite Index significantly underperforming both the Dow Jones Industrial Average and the S&P
500 Index. Friday’s weaker-than-expected non-farm payroll report, showing a pickup of only 200,000
jobs, did little to reverse Fed-tightening fears with both the S&P 500 and the Nasdaq Composite
Indexes moving lower. 10-year U.S. real rates moved significantly higher, rising 34bps to -0.77%. At
week’s end, the S&P 500 Index decreased 1.9% to 4,677.02, the Nasdaq Composite Index dropped
4.5% to 14,935.90, the Dow Jones Industrial Average decreased 0.3% to 36,231.53, the 10-year U.S.
Treasury rate increased 26bps to 1.77% and the U.S. dollar (as measured by the ICE U.S. Dollar index
- DXY) weakened 0.3%.

For More Detail read the following PDF.

The Long and Short of it, week ending 07 Jan 2022

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