Every Friday, Brian Jacobsen provides perspective on key events and topics of the current week and his thoughts about what the week ahead may hold. Here’s his report for the week of February 12–18, 2022.

The week that was

  • Investors were on edge with a hawkish Federal Reserve (Fed) and a tense situation with Russia. Equity markets swung on uncertainty over whether Russia would withdraw troops that are along its border with Ukraine. Diplomats from the U.S. and Russia are set to meet next week in Europe.
  • Earnings-reporting season is wrapping up. At the index level, S&P 500 companies were projected to have an earnings-per-share (EPS) increase of 21.61% year over year, according to FactSet. Sales were projected to rise 12.64% year over year. With 83.96% of companies reporting earnings so far, EPS results have been coming in at a 30.90% year-over-year growth rate while sales have been clocking in at a 15.58% year-over-year growth rate.


  • U.S. retail sales rebounded in January. In December, retail sales fell 2.5% for the month, but in January, sales rose 3.8%. The categories of spending that fell the most in December rose the most in January. Non-store sales (mostly online sales) rose 14.5%, furniture sales rose 7.2%, and department store sales rose 9.2%. Spending on food and drink services (basically, bars and restaurants) declined 0.9% as people shied away from public places due to the Omicron variant of COVID-19, but it wasn’t a large sales decline. Now that COVID-19 infections are falling, we could see a big shift toward spending on services in February and March.
  • U.S. industrial production in January rose 1.4%. Manufacturing output rose 0.2% for the month. December’s weather was mild while colder-than-normal temperatures hit in January, pushing utilities output up 9.9%.
  • The Federal Open Market Committee (FOMC) minutes from the January meeting didn’t really reveal anything we didn’t already know—while the minutes come out a few weeks after the meeting, the participants usually are very quick to start sharing their views shortly after the meeting ends.
    • The impression I got from the minutes is that the FOMC wants to move faster with hikes and shrinking its balance sheet than it did in the 2015‒2018 period. That’s not shocking, especially given how much the Fed has now overshot its inflation target. The Fed does seem open to the idea of eventually, possibly, selling some of its mortgage-backed securities to transition to a portfolio exclusively composed of Treasuries.
    • The Fed’s staff expects inflation to ratchet down to 2.6% this year, which would be a nice change. It may also be overly optimistic, but we’ll have to see. A lot depends on how much service-prices inflation accelerates and how quickly supply chains heal to push down goods inflation. A lot also depends on energy prices. It’s important to remember that lower inflation does not require lower prices—it just requires prices to stop rising so rapidly.


  • In Canada, Prime Minister Trudeau invoked the “Emergencies Act” to deal with protests related to vaccine mandates. Ontario’s premier said its proof of vaccination requirement will be lifted March 1, though he said it’s being lifted not because of the protests, but because COVID-19 cases have already peaked and it’s safe to lift the restrictions.
  • Shipment of avocados from Mexico was cut off after a U.S. inspector in Mexico received death threats. Inspections are suspended until the safety of U.S. personnel can be guaranteed.
  • Russia has insisted that it’s withdrawing troops from the Ukraine border while the U.S. insists Russia has added troops. Russian-backed separatists in eastern Ukraine and Ukraine’s troops accused each other of violating their cease-fire agreement. Earlier in the week, President Biden insisted the U.S. would not send troops to Ukraine, but it would impose severe economic sanctions against Russia and Russian officials if Russia invades Ukraine.
  • Iran, the U.S., and U.S. allies are continuing to hold talks. Iran has been enriching uranium and pursuing its nuclear program despite a 2015 agreement to curb that work. Sanctions have been imposed on Iran, and negotiators are going to meet in Munich over the weekend (February 19–20) to discuss what it would take to give sanctions relief to Iran.
  • The U.S. Senate passed a stop-gap funding bill to keep the government funded through March 11.

The week to come

  • Monday, February 21, is Presidents Day and U.S. markets will be closed, so traders can go shopping for furniture and other household goods.
  • On Monday, preliminary survey results of purchasing managers about business conditions in February for the eurozone and the U.K. will be released.
  • U.S. consumer confidence data for February will be released on Tuesday. Sentiment surveys have expressed a sour mood, but what consumers do—rather than how they say they feel—is more important, and spending has been strong. We’ll get an update on income and spending behavior for January on Friday.
  • The Bank of Korea has a monetary policy meeting on Wednesday.

Thanks for reading, stay informed!

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