Nationwide’s Chief of Investment Research and the Nationwide Economics team offer daily and weekly commentary and analysis of the equity and bond markets, including an overview of economic data being released, global market news, commodities and market performance by index returns. These timely insights can help you navigate markets and understand emerging trends.
The S&P 500 has now recorded 66 record highs this year, the second-most on record to the 77 in 1995. Interest rates fell despite the increased likelihood of rate hikes in 2022, with real rates at record lows, while the dollar reached a 16-month high.
This week saw very positive data across the economy, including retail sales, the National Association of Home Builders housing market index, and industrial production. Yet supply chains are still strained and inflation is at its highest level in several years. Nationwide’s Chief Economist David Berson and Senior Economist Ben Ayers provide their perspective on these reports and whether or not they suggest a pickup in the economy ahead.
Consumer spending has remained solid in the face of slowdowns in job gains and global supply chain disruptions. Real GDP growth also slowed while equity markets experienced solid earnings growth and bond benefitted from falling rates and narrowing credit spreads. Rates ticked higher as the Fed hinted at a tapering of asset purchases and sooner-than-expected rate hikes.
Consumer price inflation jumped to its highest level in more than 30 years and wage growth is well above historic averages. The net result—negative real wage growth—is starting to impact consumers.
Intense supply chain disruptions and labor shortages resulted in slower growth in the third quarter, but recent high-frequency data suggest that growth conditions are improving as Covid cases wane and as supply chains slowly heal. Job growth was strong again for October, and the most recent housing data are the best since January. These factors all point to much better growth to close out the year and provide reason for optimism that some lost growth could be recovered in the first half of 2022. But higher inflation is a growing risk. See Nationwide Economics’ take on what's happening and why this month in the economy.
The bullish narrative focuses on lack of alternatives to equities, strong earnings with resilient margins, resilient consumer spending and retail fund flows. Bears point to persistent inflation pressure, elevated valuations, continued COVID concerns and a choppy economic recovery.
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