Empower Blog

December 08, 2021

December 2021 Economic Update

U.S. Markets

Reports of a new COVID-19 variant in late November roiled markets as a wave of selling erased the month’s earlier gains.

The Dow Jones Industrial Average took the hardest hit, dropping 3.73 percent. The Standard & Poor’s 500 Index fell 0.83 percent while the Nasdaq Composite managed a small gain of 0.25 percent.1

Thanksgiving Surprise

The markets were blindsided by news over Thanksgiving Day of the emergence of a new strain of COVID-19, which led to travel bans by multiple countries and renewed unease about the prospect of a return to economic and social restrictions.

The potential global spread of this new COVID-19 variant Omicron triggered fears of another round of economic deceleration, sending investors back to their pandemic playbook of selling travel and leisure, financials, energy, and cyclicals and buying pharmaceutical companies and stay-at-home stocks.

Volatile Trading

The sharp drop on Friday, November 26, was exacerbated by reduced liquidity in the markets due to many traders being absent on this normally quiet post-holiday, shortened trading session. Stocks rebounded as traders returned to work on the following Monday but were unable to hold their gains on the month’s final trading day.

Upbeat Company Reports

The month had started off on a strong note, helped by a string of positive corporate earnings surprises, optimistic forward guidance from companies, and solid economic data. Investors were particularly encouraged by the fact that businesses had navigated the challenges of a surge in Delta variant infections in the third quarter, rising inflation, and supply chain bottlenecks.

Fed Headlines

Developments in Federal Reserve policy dominated much investor attention throughout the course of November. The first of these was the Fed announcement that it would begin its bond tapering program. Markets were unfazed by this news as they had long anticipated that the Fed would soon commence paring back its monthly bond purchases.

The second was the uncertainty surrounding whether Jerome Powell would be renominated to serve another four years as Fed chair. When President Biden finally announced his decision to renominate Powell, bond yields rose as investors became more certain that the Fed’s monetary normalization policy would proceed as planned.

Omicron Uncertainty

The consensus narrative of healthy economic expansion in 2022 was left a bit dented by the introduction of the Omicron variant. Many questions surround the new variant and its impact on global economies. Markets don’t always respond efficiently within an information void, creating the potential for further volatility until more is known about Omicron.

Sector Scorecard

Industry sector performance was mixed in November. Gains were posted in Consumer Discretionary (+3.03 percent), Consumer Staples (+1.25 percent), Materials (+1.97 percent), Real Estate (+1.21 percent), Technology (+5.33 percent), and Utilities (+1.26 percent). Losses were experienced in Communications Services (-3.06 percent), Energy (-2.73 percent), Financials (-3.40 percent), Health Care (-1.11 percent), and Industrials (-1.05 percent).2

What Investors May Be Talking About in December

In the coming weeks, markets will be sorting out news from Washington, updates on COVID variant Omicron, and economic reports.

On the economic front, investors are expected to keep a close eye on retail sales for the month of November, which are scheduled for release December 15. The November report will include the post-Thanksgiving start to the holiday shopping season and potentially be an advanced read on whether the supply chain bottlenecks might hamper holiday sales.3

Another anticipated report will be the Consumer Price Index, which will give an update on inflation trends. It’s due on December 10. If inflation continues to run hot, it may test investor confidence.4

Tip of the Month

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World Markets

A resurgence of Delta variant infections, spreading economic and social restrictions, and the emergence of a new COVID-19 variant sent international stocks broadly lower, with the MSCI-EAFE Index falling 3.79 percent in November.5

Major European markets dropped, with losses in Germany (-3.75 percent), the U.K. (-2.46 percent), and France (-1.60 percent).6

Pacific Rim markets also were under pressure. Hong Kong lost 7.49 percent, Japan tumbled 3.71 percent, and Australia slipped 0.92 percent.7


Gross Domestic Product: Economic growth in the third quarter was revised slightly higher, to 2.1 percent from 2.0 percent.8

Employment: Job growth rebounded as employers added 531,000 jobs in October. The unemployment rate fell to 4.6 percent, though the labor participation rate stayed stubbornly low at 61.6 percent.9

Retail Sales: Retail sales rose 1.7 percent, exceeding expectations. This gain was, in part, attributed to higher costs and the pulling forward of holiday shopping as consumers worried about low inventory during the holiday season.10

Industrial Production: Industrial output rose 1.6 percent in October, reversing September’s slide. About half of the monthly gain was attributed to the recovery from Hurricane Ida.11

Housing: Housing starts slipped 0.7 percent in October, a surprise downturn for market watchers who had expected an increase.12

Existing home sales rose 0.8 percent, though it was off 5.8 percent from October 2020, which represents a cyclical high.13

New home sales increased 0.4 percent, though they were lower by 23.0 percent from a year earlier. The median price jumped nearly 18.0 percent year-over-year to $407,700.14

Consumer Price Index: The prices of consumer goods and services increased 0.9 percent in October and jumped by 6.2 percent year-over-year. This represented the fifth straight month of over 5 percent annualized inflation and the sharpest year-over-year increase since 1990.15

Durable Goods Orders: Orders for long-lasting goods fell 0.5 percent, the second straight month of declines. However, excluding transportation, durable goods orders increased by 0.5 percent.16

Quote of the Month

“Create the highest, grandest vision possible for your life, because you become what you believe.”
—Oprah Winfrey

The Fed

Minutes from the November Federal Open Market Committee (FOMC) meeting showed an increasing concern over the persistence of inflation with the admission that inflationary pressures may take longer to abate than previously anticipated.

“The (Fed’s) near-term outlook for inflation was revised up, as consumer food and energy prices had risen faster than expected and production bottlenecks and recent wage gains were seen as putting somewhat greater upward pressure on prices than had been anticipated,” according to the minutes released following the Fed’s two-day meeting that ended November 3.17

Reflecting that concern, several officials suggested that the Fed’s bond tapering program may have to be accelerated in order to be ready to raise rates should inflation persist.18



November 2021







S&P 500






November 2021




Sources: Yahoo Finance, November 30, 2021

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year Treasury real yield = projected return on investment, expressed as a percentage, on the U.S. government’s 10-year bond.

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This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (S&P 500) is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. The Hang Seng Index is a free float-adjusted market capitalization-weighted stock market index that is the main indicator of the overall market performance in Hong Kong. The FTSE 100 Index is a share index of the 100 most highly capitalized companies listed on the London Stock Exchange. The DAX 30 is a Blue Chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. Nikkei 225 (Ticker: ^N225) is a stock market index for the Tokyo Stock Exchange (TSE). The Nikkei average is the most watched index of Asian stocks. The S&P/TSX Composite Index is an index of the stock (equity) prices of the largest companies on the Toronto Stock Exchange (TSX) as measured by market capitalization. The All Ordinaries (XAO) is considered a total market barometer for the Australian stock market and contains the 500 largest ASX-listed companies by way of market capitalization. The SSE Composite Index is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. BSE Sensex or Bombay Stock Exchange Sensitivity Index is a value-weighted index composed of 30 stocks that started January 1, 1986. The MSCI World Index is a free-float weighted equity index that includes developed world markets and does not include emerging markets. The MSCI Emerging Markets Index is a float-adjusted market capitalization index consisting of indices in more than 25 emerging economies. The U.S. Dollar Index (USDX, DXY, DX) is an index (or measure) of the value of the United States dollar relative to a basket of foreign currencies, often referred to as a basket of U.S. trade partner currencies. The Russell 2000 Index is a small-cap stock market index of the bottom 2,000 stocks in the Russell 3000 Index. The PHLX Oil Service Sector Index (OSX) is a modified market-weighted index composed of companies involved in the oil services sector. The CBOE Volatility Index® is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.