Tuesday's Market Minute: S&P 500 Ascends to a New Record High

The S&P 500 index closed 1.4% higher Monday, extending its push into the record. In 2021, pullbacks have been very shallow, with drops of more than 2% in a day at a total of five times all year. Not bad, considering all the bursts of COVID-19 drama and that we are not out of this pandemic yet. The emergence of the omicron variant barely left a mark after a couple of days upon initial news. U.S. consumers also seem unphased based on a report by Mastercard showing U.S. retail sales rose 8.5% during this year's holiday shopping season from Nov. 1st to Dec. 24th.

Now is the season where investors ponder on whether stocks keep on motoring higher in 2022. It’s a tricky question, considering most assets look expensive by historical standards and global developed world central banks appear to be on pace for a coordinated tightening cycle beginning sometime in the new year. U.S. financial conditions are still very accommodative even as the Federal Reserve has begun stepping up its exit from coronavirus crisis-era stimulus measures to slow elevated inflation. Perhaps one reason financial conditions might remain loose is a bet that the Fed might not be able to increase interest rates as much as it hoped if economic growth slows more than anticipated due to the combination of inflation and the lingering pandemic.

However, the expedited taper of Fed purchases and an FOMC meeting in March for a potential rate hike could set the stage for financial conditions to start to tighten. If that is the case, much like the fourth quarter this year, it is reasonable to expect there are going to be bouts of volatility next year.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. The content was purely for informational purposes only and not intended to be investing advice.

Image Sourced from Pixabay