“Will this be history repeating itself for the start of 2022?” Rise in banking and energy stocks and fall in rate-sensitive growth stocks? Investors shouldn’t have been surprised by the increasingly hawkish tone used by the US Federal Reserve and yet the anticipation of seeing its most recent black-and-white comments yesterday prompted a sell-off in tech stocks that did not did that continue. It certainly feels like the bagpiper is calling to be paid, inflation numbers for the next few months seem pretty accurate if Germany’s latest update is anything to go by.
“And this pressure on households is not a good idea for any government, especially those looking to raise taxes to pay for some of the blows that Covid has inflicted. Pressure could mount on the British Chancellor to turn around on his plans to boost the NHS, but at the moment it looks like Rishi Sunak is not to turn around. But how can consumers be expected to continue spending the country outside of the pandemic if their cash reserves are dwindling? And how will the popularity of this government cope with people’s growing discomfort as energy bills soar higher and higher. Working from home on a dip in the cold takes on a whole new hue, and there will be plenty of extra threading to keep those thermostats’ frozen fingers out.
“What is also noticeable today is the lack of enthusiasm of investors for past performance. Next may have boosted sales and raised its profit forecast for a pretty dramatic fifth time in ten months, but the big story quickly becomes familiar. Prices are expected to rise to meet the double threat of rising wages and rising shipping costs. How will the decision to pass on costs affect sales to consumers? This is the big question that many businesses will have to grapple with over the next 6 to 12 months. If this Christmas was all about making up for lost ground, spring might be more like clawing back lost savings.
“Companies that provide vital services and these must-haves look great to many investors right now. Walgreens shares enjoyed a nice rally early in the session before retreating slightly as the company raised its earnings forecast. Sales hit their highest level in twenty years as those who came for the Covid vaccine stuck to roam the aisles and found many more temptations than in previous years. But overall, US investors are feeling nervous, looking for that silver shard among the dark clouds as last year’s tech rally recedes. “