The Long and Short of it, week ending 17 Dec 2021

Publication Type: Market Commentaries

U.S. stock prices moved lower with all 3 major stock indexes decreasing every day last week except
for Wednesday. Tech stocks sharply underperformed last week as evidenced by the Nasdaq
Composite Index which fell almost twice as much as the Dow Jones Industrial Average. Uncertainty
surrounding the outcome of the 2-day FOMC meeting ending Wednesday, exacerbated by Tuesday’s
record high PPI release, and concerns regarding the increase in the number of Omicron infections,
pushed markets 1% to 1.5% lower through Tuesday. Following Wednesday’s FOMC announcement
that the rate of tapering would be doubled along with a dot-plot projection of three 25bp rate
increases in 2022, stock prices moved sharply higher. Wednesday’s “buy-the-fact” rally, however,
was short lived as investors re-examined the potential consequence of tighter monetary policy going
forward, pushing markets lower and furthering the rotation from tech/growth stocks into value
stocks. The 10-year U.S. Treasury rate also moved lower on the week, mainly due to falling
inflation expectations in light of more aggressive Fed tightening. For the week, the S&P 500 Index
decreased 1.9% to 4,620.64, the Nasdaq Composite Index fell 2.9% to 15,169.68, the Dow Jones
Industrial Average decreased 1.7% to 35,366.56, the 10-year U.S. Treasury rate fell 7bps to 1.41%
and the U.S. dollar (as measured by the ICE U.S. Dollar index - DXY) strengthened 0.5%.

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The Long and Short of it, week ending 17 Dec 2021

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