Inflation Reaches a 39-Year High – Closing Bull Dec. 17th, 2021
Quick Summary:
In this week’s Closing Bull, Inflation reaches a 39-year high, unemployment rates are down to 4.2%, the lowest level since the pandemic began, producer prices grow at the fastest pace on record, Apple is closer to becoming the first $3T company, 90% of all bitcoins have been mined, and a fun fact for the week.
Let’s get into the news!
Key News This Week:
Market recap and system update
Inflation reaches a 39-year high
Producer prices gained at their fastest pace on record
Unemployment rate plunges
Apple gets closer to becoming earth’s first $3T company
90% of all bitcoins have been mined
Interesting facts
Read the Transcript
Welcome to my financial markets’ re-cap for the week.
Before we get to the news, a quick update on the system. We are still long in the market, I had mentioned last week that we were still expecting a new all-time high soon, and we got it.
But, it was quite short-lived for the S&P 500. It has continued to be a wild ride in the markets due to the fear around Omicron and its impact on the economy.
We remain long, and we are still expecting a Santa rally into year-end. More on that next week.
So that was the system update, now here’s what happened in the news this week?
Obviously, the news wires are sensitive to the new variant, but I am going to focus on news out with Covid 19, so first up was the other big news of the week, the Fed meeting:
During the Fed’s final meeting of 2021, chief Jerome Powell said the US’s central bank plans to slash its economy-boosting bond purchases twice as fast as previously planned.
That puts the Fed on track to end bond splurges in March, not June — meaning interest rates could rise as early as spring.
In March, the Fed wasn’t expected to hike rates until 2024.
Now it expects to hike them three times next year.
The reason: Powell called inflation transitory until this month when he officially “retired” the term. Prices are soaring faster than expected, with inflation at a 39-year high.
The solution: Higher interest rates make borrowing more expensive. Extra IOU payments discourage spending and encourage saving, which can help lower prices.
The reaction: Stocks jumped after Powell announced his inflation control plan, which reduced uncertainty for investors and relaxed price fears.
The fed was under pressure to act as consumer prices rose at their fastest pace in 39 years in November, and it wasn’t just due to volatile goods, like food and energy. Items across the economy, from rents to home furniture, also rose a concerning amount.
And this week, producer prices gained at their fastest pace on record. Higher prices paid by producers often trickle down and hit consumers’ wallets.
At the same time, job gains have been strong and the unemployment rate has plunged to 4.2%, the lowest level since the pandemic began.
Powel said that “We are making rapid progress towards maximum employment,” one of their key mandates.
In other news, Apple is close to becoming earth’s first $3T company, as investors eye new VR and iCars.
Apple’s long-rumored self-driving-car project has hit many roadblocks, but it’s reportedly finally on track to arrive by 2025.
It took Apple over 40 years to reach a $1T valuation (in 2018). It took two more years to add another trillion. Just 16 months after that, it’s now on the brink of a $3T valuation.
It almost happened this week and perhaps they will reach that goal with a rally in the broader markets next week.
In bitcoin news, it was reported that 90% of all bitcoins have now been mined – but the remaining 10% will take over 100 years to reach the open market.
Also, a Cornell professor was interviewed on CNBC this week saying that the future may not include bitcoin. He said that although ‘Blockchain is the underlying technology behind most cryptocurrencies. It’s essentially a digital ledger of virtual currency transactions which is distributed across a global network of computers.
And Bitcoin’s use of blockchain technology is not very efficient.
“Bitcoin uses a validation mechanism for transactions that is environmentally destructive and doesn’t scale up very well” he explained. “Indeed, bitcoin’s carbon footprint is bigger than the whole of New Zealand.”
He suggested that newer cryptocurrencies used the blockchain much more efficiently and may overtake bitcoin in time.
Interesting…
Speaking of interesting….
Lastly, here’s an interesting fact:
It was revealed this week that Vladimir Putin, one of the most powerful leaders in the world moonlighted as a taxi driver after the Soviet Union collapsed. A true rags to absolute power story.
That’s it from me, it’s the weekend, time to put down the tools, have a great weekend, thanks for watching and bye for now.