AE Wealth Management: Market Minute Blog | 3/2/22
The 2022 State of the Union address didn’t offer anything new regarding relief from higher energy prices or soaring inflation, support for Ukraine, or new government spending other than a re-hash of the Build Back Better agenda. Meanwhile, oil cracked $110 per barrel before easing back to about $108 per barrel, a significantly higher number than just a month ago.
The ADP jobs number came in much higher than expected at +475,000, giving the Federal Reserve all the more incentive to proceed with raising rates. In response, Chairman Jerome Powell testified before Congress that he would support a 25 bps (0.25%) increase at the Fed’s March meeting. Just like the market reacted to weaker-than-expected sanctions against Russia last Thursday and Friday, it shot up on Powell’s dovish comments.
Once more, the market seems disconnected from world events. The Russia-Ukraine conflict is steadily pushing oil prices higher, which will continue to provide upward pressure on inflation. The Fed seems to be stuck between a rock and a hard place; the calls to combat inflation more aggressively continue to come in from politicians eager to see inflation ease in advance of quickly approaching mid-term elections while the Fed still seems overly concerned with upsetting the market. The 10-year Treasury yield has come down off recent highs over 2% to about 1.8% as a result of the Ukrainian situation, and the Fed may feel the market has done some of its job.
The overall mood from an economic standpoint appears pretty grim, however. In a recent Gallup survey, 70% of respondents expressed pessimism about the current strength of the economy in the U.S.
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