Market Commentary: 4Q 2021



Fed Doubles Pace of Tapering & Signals Three Rate Hikes in 2022

Equity markets exited 2021 with impressive double-digit price appreciations across the board as investors digested a slew of macro data points, still ultra-low (zero or negative) interest rates in the G7 world and longer-than-expected global supply chain bottlenecks.

  • On December 15th, the FOMC decided to double the pace of asset purchases tapering, citing persistent inflation pressures and substantial progress towards full employment. The tapering is now on track to be completed around March 2022. The threshold for rate liftoff now rests entirely on the jobs front as the updated statement indicates that the inflation threshold even under the Fed’s new average inflation targeting has been met.
  • The updated dot plot (economic projections) indicated a median forecast of 3 hikes in 2022 (a hawkish shift), 3 hikes in 2023, and 2 hikes in 2024. 10 FOMC members projected 3 hikes in 2022 vs. 0 member at the September meeting and 2 members even projected 4 hikes. The unemployment forecast was revised lower and inflation was revised higher this year and next.
  • The US November core PCE price index edged up 0.5% on a month-over-month basis (mom), and the year-over-year (yoy) increase rose to 4.7%. In Canada, Headline CPI inflation remained flat at +4.7% on a year-over-year basis (yoy) in November, in line with consensus. The CPI excluding food and energy moderated in November to +3.1% (yoy) from +3.2% in October.
  • The US Nonfarm payrolls rose by +210k in November, well below consensus. Nevertheless, the unemployment rate declined by 0.4% to 4.2% despite improving labor force participation rate.


Index Performance Q4/21 Return 12/31/2021 YTD Return 12/31/2021
TSX +5.7% +21.7%
Dow +7.4% +18.7%
S&P 500 +10.7% +26.9%
NASDAQ +8.3% +21.4%
Russell 2000 (Small-cap) +0.2% +13.7%
10-year US Treasury yield 1.51% (+5 bps) +60 bps
Canada’s 10-year GoC yield 1.43% (-4 bps) +75 bps
US Dollar Index (DXY) 95.6 (+1.7%) +6.3%
WTI US$/bbl $75.4 (-0.4%) +55.5%
Gold US$/oz $1,830 (+4.2%) -3.6%
VIX (30 day) 17.2 (-19%) -24%








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