Category Archives: The “Heat Map”

The Numbers & “Heat Map”

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THE NUMBERS
Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY

CONSUMER HEALTH

POSITIVE

 U.S. Real GDP growth for Q4 2021 increased at an annual rate of 7.0% compared to 2.3% in Q3 (according to second estimate). The acceleration was driven primarily by private inventory investment. Real GDP increased by 5.7% in 2021 versus a decrease of -3.4% in 2020. Disposable income saw a slight increase of 0.3% and personal saving rate decreased to 7.4% in Q4 from the previous 9.5% in Q3 highlighting increased consumer spending.

CORPORATE EARNINGS

NEUTRAL

 For Q1 2022 the estimated earnings growth rate is 4.8% – the lowest since Q4 2020 (3.8%). This estimate was revised downward from the previous forecast of 5.7% in December 2021. So far, 8 out of 13 companies reported a positive EPS surprise and 10 beat revenue expectations. Sixty-six S&P500 companies issued negative EPS guidance and 29 companies issue positive EPS guidance.

EMPLOYMENT

POSITIVE

 Total nonfarm payroll employment rose by 678,000 in February, and the unemployment rate edged down from 4% to 3.8%. Job growth was widespread, led by gains in leisure and hospitality, professional and business services, health care, and construction.

INFLATION

NEGATIVE

 CPI rose 7.9% year-over-year in February 2022, the highest increase since 1982, driven by the global supply chain backlog and continued consumer pent up demand. Inflation concerns are clearly impacting the markets, the FED and consumer behavior.

FISCAL POLICY

NEUTRAL

 Congress passed a $1.5 trillion spending package expected to be signed into law next week. Republicans rejected any additional COVID-19 related aid, which was removed from the bill. $13.6 billion aid package to help Ukraine saw strong bipartisan support. The Violence Against Women Act was reauthorized and Democrats pushed for a 6.7% increase in domestic spending.

MONETARY POLICY

NEUTRAL

 The Fed raised rates by the expected 25 bps last week and Jay Powell projected a clear path for 2022 with as many as six additional rate hikes bringing short-term rates to 1.75-2.00% by year end 2022. Reduction of the Fed’s balance sheet was not mentioned.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEGATIVE

 The conflict between Russia and Ukraine keeps worsening as negotiations are not leading to any results and attacks by Russia do not cease. President Zelensky is willing to meet to discuss possible solutions however, Putin wants to obtain full control over Eastern Ukraine including the port system along the Black Sea.

ECONOMIC RISKS

NEUTRAL

 Supply chain disruptions in the U.S. are waning but the rising cost of oil due to the Russian- Ukraine war is likely to cause additional inflationary pressures not only on gasoline prices but also on many other goods and services.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

The Numbers & “Heat Map”

Posted on by

THE NUMBERS
Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY

CONSUMER HEALTH

POSITIVE

 U.S. Real GDP growth for Q4 2021 increased at an annual rate of 7.0% compared to 2.3% in Q3 (according to second estimate). The acceleration was driven primarily by private inventory investment. Real GDP increased by 5.7% in 2021 versus a decrease of -3.4% in 2020. Disposable income saw a slight increase of 0.3% and personal saving rate decreased to 7.4% in Q4 from the previous 9.5% in Q3 highlighting increased consumer spending.

CORPORATE EARNINGS

POSITIVE

 Fourth quarter earnings showed strong results with 76% of S&P500 companies beating estimated earnings and 78% of companies reporting revenues in excess of forecasts. The blended growth rate for 2021 was 30.7%. For Q1 2022 the estimated earnings growth rate is 4.8% – the lowest since Q4 2020 (3.8%). So far, three out of seven companies reported a positive EPS surprise and six beat revenue expectations.

EMPLOYMENT

POSITIVE

 Total nonfarm payroll employment rose by 678,000 in February, and the unemployment rate edged down from 4% to 3.8%. Job growth was widespread, led by gains in leisure and hospitality, professional and business services, health care, and construction.

INFLATION

NEGATIVE

 CPI rose 7.9% year-over-year in February 2022, the highest increase since 1982, driven by the global supply chain backlog and continued consumer pent up demand. Inflation concerns are clearly impacting the markets, the FED and consumer behavior.

FISCAL POLICY

NEUTRAL

 Congress passed a $1.5 trillion spending package expected to be signed into law next week. Republicans rejected any additional COVID-19 related aid, which was removed from the bill. $13.6 billion aid package to help Ukraine saw strong bipartisan support. The Violence Against Women Act was reauthorized and Democrats pushed for a 6.7% increase in domestic spending.

MONETARY POLICY

NEUTRAL

 The Fed raised rates by the expected 25 bps last week and Jay Powell projected a clear path for 2022 with as many as 6 additional rate hikes bringing short-term rates to 1.75-2.00% by year end 2022. Reduction of the Fed’s balance sheet was not mentioned.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEGATIVE

 The conflict between Russia and Ukraine keeps worsening as negotiations are not leading to any solutions and attacks by Russia do not cease. Russia requested China’s military and economic assistance as the U.S., E.U., and U.K. continue to support Ukraine and sanction Russia. COVID -19 restrictions are easing across the world.

ECONOMIC RISKS

NEUTRAL

 Supply chain disruptions in the U.S. are waning but the rising cost of oil due to the Russian- Ukraine war is likely to cause additional inflationary pressures not only on gasoline prices but also on many other goods and services.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

The Numbers & “Heat Map”

Posted on by

THE NUMBERS
Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY

CONSUMER HEALTH

POSITIVE

 U.S. Real GDP growth for Q4 2021 increased at an annual rate of 7.0% compared to 2.3% in Q3 (according to second estimate). The acceleration was driven primarily by private inventory investment. Real GDP increased by 5.7% in 2021 versus a decrease of -3.4% in 2020. Disposable income saw a slight increase of 0.3% and personal saving rate decreased to 7.4% in Q4 from the previous 9.5% in Q3 highlighting increased consumer spending.

CORPORATE EARNINGS

POSITIVE

 Fourth quarter earnings are showing strong results with 76% of companies that reported earnings so far beating estimates by an average of 8.2%. Revenues also well above estimates with 78% of S&P 500 companies reporting actual revenue above forecasts. Blended earnings growth rate for 2021 was 30.7%. So far, 99% of S&P500 companies have reported earnings.

EMPLOYMENT

POSITIVE

 Total nonfarm payroll employment rose by 678,000 in February, and the unemployment rate edged down from 4% to 3.8%. Job growth was widespread, led by gains in leisure and hospitality, professional and business services, health care, and construction.

INFLATION

NEGATIVE

 CPI rose 7.5% year-over-year in January 2022, the highest increase since 1982, driven by the global supply chain backlog and continued consumer pent up demand. Inflation concerns are clearly impacting the markets, the FED and consumer behavior. February inflation numbers to be released on March 10th.

FISCAL POLICY

NEUTRAL

 President Biden is shifting from the Build Back Better Bill to a four-point economic rescue plan. Emphasis on reducing deficits and containing inflation will be critical to sway Senator Manchin. The four points will be: moving goods cheaper and faster, reducing everyday costs, promoting competition, and eliminating job barriers.

MONETARY POLICY

NEUTRAL

 Fed discussed a triple threat of tightening: raise interest rates, halt purchases, and reduce its balance sheet (reducing holdings of Treasurys and mortgage-backed securities). Gradual and steady reduction of liquidity will be key in preserving market performance (fast and sudden changes would most likely result in panic-driven sell offs). Upcoming Fed meeting on March 15- 16.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEGATIVE

 The Russian invasion into Ukraine has now turned into a full-blown global event. US, UK and EU authorities are taking many steps to cripple Russia including closing their access to SWIFT. Commodity prices are spiking along with Oil. COVID-19 concerns continue to abate and re- openings are more the norm than closures and lockdowns. The CDC is easing rules.

ECONOMIC RISKS

NEUTRAL

 Supply chain disruptions in the U.S. are waning but the rising cost of oil due to the Russian-Ukraine war is likely to cause additional inflationary pressures not only on gasoline prices but also many other goods and services.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

The Numbers & “Heat Map”

Posted on by

THE NUMBERS
Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY

CONSUMER HEALTH

POSITIVE

 U.S. Real GDP growth for Q4 2021 increased at an annual rate of 7.0% compared to 2.3% in Q3 (according to second estimate). The acceleration was driven primarily by private inventory investment. Real GDP increased by 5.7% in 2021 versus a decrease of -3.4% in 2020. Disposable income saw a slight increase of 0.3% and personal saving rate decreased to 7.4% in Q4 from the previous 9.5% in Q3 highlighting increased consumer spending.

CORPORATE EARNINGS

POSITIVE

 Fourth quarter earnings are showing strong results with 76% of companies that reported earnings so far beating estimates by an average of 8.2%. Revenues also well above estimates with 78% of S&P 500 companies reporting actual revenue above forecasts. Blended earnings growth rate for 2021 was 30.7%. So far, 95% of S&P500 companies have reported earnings.

EMPLOYMENT

POSITIVE

 U.S. Payroll Report for January U.S. added 467,000 jobs in January, beating estimates of 125,000. Red-hot private sector hiring drives the payrolls surge. Revisions add 709,000 jobs in prior two months. Unemployment rate rises to 4% from 3.9%.

INFLATION

NEGATIVE

 CPI rose 7.5% year-over-year in January 2022, the highest increase since 1982, driven by the global supply chain backlog and continued consumer pent up demand. Inflation concerns are clearly impacting the markets, the FED and consumer behavior.

FISCAL POLICY

NEUTRAL

 President Biden is shifting from the Build Back Better Bill to a four-point economic rescue plan. Emphasis on reducing deficits and containing inflation will be critical to sway Senator Manchin. The four points will be: moving goods cheaper and faster, reducing everyday costs, promoting competition, and eliminating job barriers.

MONETARY POLICY

NEUTRAL

 Fed discussed a triple threat of tightening: raise interest rates, halt purchases, and reduce its balance sheet (reducing holdings of Treasurys and mortgage-backed securities). Gradual and steady reduction of liquidity will be key in preserving market performance (fast and sudden changes would most likely result in panic-driven sell offs). Upcoming Fed meeting on March 15- 16.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEGATIVE

 The Russian invasion into Ukraine has now turned into a full-blown global event. US, UK and EU authorities are taking many steps to cripple Russia including closing their access to SWIFT. Commodity prices are spiking along with Oil. COVID-19 concerns continue to abate and re- openings are more the norm than closures and lockdowns. The CDC is easing rules.

ECONOMIC RISKS

NEUTRAL

 Supply chain disruptions in the U.S. are waning but now there are trucker protests on the Canadian / U.S. border. Canada is the second largest trading partner with the U.S. (after China) but our largest export market.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

The Numbers & “Heat Map”

Posted on by

THE NUMBERS
Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY

CONSUMER HEALTH

POSITIVE

 U.S. Real GDP growth for Q4 2021 increased at an annual rate of 6.9% compared to 2.3% in Q3 (according to advance estimate). The acceleration was driven primarily by private inventory investment. Real GDP increased by 5.7% in 2021 versus a decrease of -3.4% in 2020. Disposable income saw a slight increase of 0.3% and personal saving rate decreased to 7.4% in Q4 from the previous 9.5% in Q3 highlighting increased consumer spending.

CORPORATE EARNINGS

POSITIVE

 Fourth quarter earnings are showing strong results with 76% of companies that reported earnings so far beating estimates by an average of 8.2%. Some notable positive (Amazon) and negative (Facebook) surprises in big tech. Revenues also well above estimates with 77% of S&P 500 companies reporting actual revenue above forecasts. Blended earnings growth rate for 2021 was 47%.

EMPLOYMENT

POSITIVE

 U.S. Payroll Report for January U.S. added 467,000 jobs in January, beating estimates of 125,000. Red-hot private sector hiring drives the payrolls surge. Revisions add 709,000 jobs in prior two months. Unemployment rate rises to 4% from 3.9%.

INFLATION

NEGATIVE

 CPI rose 7.5% year-over-year in January 2022, the highest increase since 1982, driven by the global supply chain backlog and continued consumer pent up demand. Inflation concerns are clearly impacting the markets, the FED and consumer behavior.

FISCAL POLICY

NEUTRAL

 The Build Back Better Bill has been scaled back from $2.2 trillion to a $1.8 trillion version as Senator Manchin continues to hold back support. President Biden has mentioned the idea of breaking up the BBB Bill into smaller pieces to be able to pass fractions at a time. The economy seems to be digesting a new world where fiscal policy is no longer considered an economic stimulus.

MONETARY POLICY

NEUTRAL

 Fed discussed a triple threat of tightening: raise interest rates, halt purchases, and reduce its balance sheet (reducing holdings of Treasurys and mortgage-backed securities). Gradual and steady reduction of liquidity will be key in preserving market performance (fast and sudden changes would most likely result in panic-driven sell offs).

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEGATIVE

 The Russian invasion into Ukraine has now turned into a full-blown global event. US, UK and EU authorities are taking many steps to cripple Russia including closing their access to SWIFT. Commodity prices are spiking along with Oil. COVID-19 concerns continue to abate and re- openings are more the norm than closures and lockdowns. The CDC is easing rules.

ECONOMIC RISKS

NEUTRAL

 Supply chain disruptions in the U.S. are waning but now there are trucker protests on the Canadian / U.S. border. Canada is the second largest trading partner with the U.S. (after China) but our largest export market.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

The Numbers & “Heat Map”

Posted on by

THE NUMBERS
Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY

CONSUMER HEALTH

POSITIVE

 U.S. Real GDP growth for Q4 2021 increased at an annual rate of 6.9% compared to 2.3% in Q3 (according to advance estimate). The acceleration was driven primarily by private inventory investment. Real GDP increased by 5.7% in 2021 versus a decrease of -3.4% in 2020. Disposable income saw a slight increase of 0.3% and personal saving rate decreased to 7.4% in Q4 from the previous 9.5% in Q3 highlighting increased consumer spending.

CORPORATE EARNINGS

POSITIVE

 Fourth quarter earnings are showing strong results with 76% of companies that reported earnings so far beating estimates by an average of 8.2%. Some notable positive (Amazon) and negative (Facebook) surprises in big tech. Revenues also well above estimates with 77% of S&P 500 companies reporting actual revenue above forecasts. Blended earnings growth rate for 2021 was 47%.

EMPLOYMENT

POSITIVE

 U.S. Payroll Report for January U.S. added 467,000 jobs in January, beating estimates of 125,000. Red-hot private sector hiring drives the payrolls surge. Revisions add 709,000 jobs in prior two months. Unemployment rate rises to 4% from 3.9%.

INFLATION

NEGATIVE

 CPI rose 7.5% year-over-year in January 2022, the highest increase since 1982, driven by the global supply chain backlog and continued consumer pent up demand. Inflation concerns are clearly impacting the markets, the FED and consumer behavior.

FISCAL POLICY

NEUTRAL

 The Build Back Better Bill has been scaled back from $2.2 trillion to a $1.8 trillion version as Senator Manchin continues to hold back support. President Biden has mentioned the idea of breaking up the BBB Bill into smaller pieces to be able to pass fractions at a time. The economy seems to be digesting a new world where fiscal policy is no longer considered an economic stimulus.

MONETARY POLICY

NEUTRAL

 Fed discussed a triple threat of tightening: raise interest rates, halt purchases, and reduce its balance sheet (reducing holdings of Treasurys and mortgage-backed securities). Gradual and steady reduction of liquidity will be key in preserving market performance (fast and sudden changes would most likely result in panic-driven sell offs).

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEUTRAL

 The Russia/Ukraine situation is very fluid with comments from Vladmir Putin, Volodymyr Zelenskyy and Joe Biden being part of the mix each day. COVID-19 concerns continue to abate and re-openings are more the norm than closures and lockdowns.

ECONOMIC RISKS

NEUTRAL

 Supply chain disruptions in the U.S. are waning but now there are trucker protests on the Canadian / U.S. border. Canada is the second largest trading partner with the U.S. (after China) but our largest export market.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

The Numbers & “Heat Map”

Posted on by

THE NUMBERS
Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY

CONSUMER HEALTH

POSITIVE

 U.S. Real GDP growth for Q4 2021 increased at an annual rate of 6.9% compared to 2.3% in Q3 (according to advance estimate). The acceleration was driven primarily by private inventory investment. Real GDP increased by 5.7% in 2021 versus a decrease of -3.4% in 2020. Disposable income saw a slight increase of 0.3% and personal saving rate decreased to 7.4% in Q4 from the previous 9.5% in Q3 highlighting increased consumer spending.

CORPORATE EARNINGS

POSITIVE

 Fourth quarter earnings are showing strong results with 76% of companies that reported earnings so far beating estimates by an average of 8.2%. Some notable positive (Amazon) and negative (Facebook) surprises in big tech. Revenues also well above estimates with 77% of S&P 500 companies reporting actual revenue above forecasts. Blended earnings growth rate for 2021 was 47%.

EMPLOYMENT

POSITIVE

 U.S. Payroll Report for January U.S. added 467,000 jobs in January, beating estimates of 125,000. Red-hot private sector hiring drives the payrolls surge. Revisions add 709,000 jobs in prior two months. Unemployment rate rises to 4% from 3.9%.

INFLATION

NEGATIVE

 CPI rose 7.5% year-over-year in January 2022, the highest increase since 1982, driven by the global supply chain backlog and continued consumer pent up demand. Inflation concerns are clearly impacting the markets, the FED and consumer behavior.

FISCAL POLICY

NEUTRAL

 The Build Back Better Bill has been scaled back from $2.2 trillion to a $1.8 trillion version as Senator Manchin continues to hold back support. President Biden has mentioned the idea of breaking up the BBB Bill into smaller pieces to be able to pass fractions at a time. The economy seems to be digesting a new world where fiscal policy is no longer considered an economic stimulus.

MONETARY POLICY

NEUTRAL

 Fed discussed a triple threat of tightening: raise interest rates, halt purchases, and reduce its balance sheet (reducing holdings of Treasurys and mortgage-backed securities). Gradual and steady reduction of liquidity will be key in preserving market performance (fast and sudden changes would most likely result in panic-driven sell offs).

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEUTRAL

 COVID-19 concerns seem to be abating in many parts of the U.S. with several important states (NJ, NY & IL) finally lifting mask mandates. These moves bode well for spring and summer travel season and resulting consumer spending spree. Important to watch the Russia/Ukraine situation that continues to unfold.

ECONOMIC RISKS

NEUTRAL

 Supply chain disruptions are hampering the economy; however, demand remains very strong. While global logistics are operating far below normal efficacy, it appears the supply chain is slowly improving with inventories increasing in Q4 2021. Supply chain logistics may reach normalcy by late 2022.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

The Numbers & “Heat Map”

Posted on by

THE NUMBERS
Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY

CONSUMER HEALTH

POSITIVE

 U.S. Real GDP growth for Q4 2021 increased at an annual rate of 6.9% compared to 2.3% in Q3 (according to advance estimate). The acceleration was driven primarily by private inventory investment. Real GDP increased by 5.7% in 2021 versus a decrease of -3.4% in 2020. Disposable income saw a slight increase of 0.3% and personal saving rate decreased to 7.4% in Q4 from the previous 9.5% in Q3 highlighting increased consumer spending.

CORPORATE EARNINGS

POSITIVE

 Fourth quarter wrapped up and earnings are likely to be impacted by labor, supply shortages, price increases and wage inflation. As EPS estimates are ironed out each of these items will play a role, some greater than others. Watch for increases but at a muted pace.

EMPLOYMENT

POSITIVE

 Although December increase in payrolls did not meet expectations (199,000 jobs added versus 422,000 expected), the unemployment rate fell to 3.9% versus an expected 4.1%. Wages increased more than expected at 4.7% year-over-year. Strong recovery in leisure and hospitality which had the biggest gain by industry and accounted for more than 25% of all jobs added in December (55,000).

INFLATION

NEGATIVE

 CPI rose 7% year-over-year in December 2021, the highest increase since 1982, driven by the global supply chain backlog and continued consumer pent up demand. Will inflation be transitory or permanent? Goldman Sachs capital market assumption forecast CPI at an average of 3.1% for 2022 suggesting a significant decrease in inflation from the current 7%.

FISCAL POLICY

NEUTRAL

 The Build Back Better Bill has been scaled back from $2.2 trillion to a $1.8 trillion version as Senator Manchin continues to hold back support. President Biden has mentioned the idea of breaking up the BBB Bill into smaller pieces to be able to pass fractions at a time. The economy seems to be digesting a new world where fiscal policy is no longer considered an economic stimulus.

MONETARY POLICY

NEUTRAL

 Fed discussed a triple threat of tightening: raise interest rates, halt purchases, and reduce its balance sheet (reducing holdings of Treasurys and mortgage-backed securities). Gradual and steady reduction of liquidity will be key in preserving market performance (fast and sudden changes would most likely result in panic-driven sell offs). Expect three rate hikes in 2022 beginning in March.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEUTRAL

 The omicron COVID-19 variant has shown up in many parts of the world. This strain seems less virulent and more reactive to boosters so its impact it still yet to be calculated. A rebound in travel and leisure now seems unsure. Important to watch the Russia/Ukraine situation.

ECONOMIC RISKS

NEUTRAL

 Supply chain disruptions are hampering the economy; however, demand remains very strong. While global logistics are operating far below normal efficacy, it appears the supply chain is slowly improving and may reach normalcy by mid-to-late-2022.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

The Numbers & “Heat Map”

Posted on by

THE NUMBERS
Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY

CONSUMER HEALTH

POSITIVE

 U.S. GDP growth decelerated to a 2% annualized pace in Q3. The slowdown was driven primarily by supply chain constraints. Economists expect a modest acceleration in Q4. Early high-frequency data (shopping, travel, movie ticket sales) is showing some slowing. Holiday retails sales numbers will be important to gauge consumer behavior.

CORPORATE EARNINGS

POSITIVE

 Fourth quarter wrapped up and earnings are likely to be impacted by labor, supply shortages, price increases and wage inflation. As EPS estimates are ironed out each of these items will play a role, some greater than others. Watch for increases but at a muted pace.

EMPLOYMENT

POSITIVE

 Although December increase in payrolls did not meet expectations (199,000 jobs added versus 422,000 expected), the unemployment rate fell to 3.9% versus an expected 4.1%. Wages increased more than expected at 4.7% year-over-year. Strong recovery in leisure and hospitality which had the biggest gain by industry and accounted for more than 25% of all jobs added in December (55,000).

INFLATION

NEGATIVE

 CPI rose 7% year-over-year in December 2021, the highest increase since 1982, driven by the global supply chain backlog and continued consumer pent up demand. Will inflation be transitory or permanent? Goldman Sachs capital market assumption forecast CPI at an average of 3.1% for 2022 suggesting a significant decrease in inflation from the current 7%.

FISCAL POLICY

NEUTRAL

 The Build Back Better Bill has been scaled back from $2.2 trillion to a $1.8 trillion version as Senator Manchin continues to hold back support. President Biden has mentioned the idea of breaking up the BBB Bill into smaller pieces to be able to pass fractions of it. The economy seems to be digesting a new world where fiscal policy is no longer considered an economic stimulus.

MONETARY POLICY

NEUTRAL

 Fed discussed a triple threat of tightening: raise interest rates, halt purchases, and reduce its balance sheet (reducing holdings of Treasurys and mortgage-backed securities). Gradual and steady reduction of liquidity will be key in preserving market performance (fast and sudden changes would most likely result in panic-driven sell offs). Expect three rate hikes in 2022 beginning in March.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEUTRAL

 The omicron COVID-19 variant has shown up in many parts of the world. This strain seems less virulent and more reactive to boosters so its impact it still yet to be calculated. A rebound in travel and leisure now seems unsure. Important to watch the Russia/Ukraine situation.

ECONOMIC RISKS

NEUTRAL

 Supply chain disruptions are hampering the economy; however, demand remains very strong. While global logistics are operating far below normal efficacy, it appears the supply chain is slowly improving and may reach normalcy by mid-to-late-2022.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

The Numbers & “Heat Map”

Posted on by

THE NUMBERS
Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY

CONSUMER HEALTH

POSITIVE

 U.S. GDP growth decelerated to a 2% annualized pace in Q3. The slowdown was driven primarily by supply chain constraints. Economists expect a modest acceleration in Q4. Early high-frequency data (shopping, travel, movie ticket sales) is showing some slowing. Holiday retails sales numbers will be important to gauge consumer behavior.

CORPORATE EARNINGS

POSITIVE

 Fourth quarter wrapped up and earnings are likely to be impacted by labor, supply shortages, price increases and wage inflation. As EPS estimates are ironed out each of these items will play a role, some greater than others. Watch for increases but at a muted pace.

EMPLOYMENT

POSITIVE

 Although December increase in payrolls did not meet expectations (199,000 jobs added versus 422,000 expected), the unemployment rate fell to 3.9% versus an expected 4.1%. Wages increased more than expected at 4.7% year-over-year. Strong recovery in leisure and hospitality which had the biggest gain by industry and accounted for more than 25% of all jobs added in December (55,000).

INFLATION

NEGATIVE

 CPI rose 6.8% year-over-year in November, the highest increase since 1982, driven by the global supply chain backlog and continued consumer pent up demand. Will inflation be transitory or permanent? Goldman Sachs capital market assumption forecast CPI at an average of 3.1% for 2022 suggesting a significant decrease in inflation from the current 6.8%. Updated inflation numbers for December to be released on January 12th.

FISCAL POLICY

NEUTRAL

 The Build Back Better Bill has been pushed into 2022 in a scaled back $1.8 trillion version as Senator Manchin continues to hold back support. The economy seems to be digesting a new world where fiscal policy is no longer considered an economic stimulus.

MONETARY POLICY

NEUTRAL

 Fed discussed a triple threat of tightening: raise interest rates, halt purchases, and reduce its balance sheet (reducing holdings of Treasurys and mortgage-backed securities). Gradual and steady reduction of liquidity will be key in preserving market performance (fast and sudden changes would most likely result in panic-driven sell offs). Expect three rate hikes in 2022 beginning in March.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEUTRAL

 The new omicron COVID-19 variant has shown up in many parts of the world. This strain seems less virulent and more reactive to boosters so its impact it still yet to be calculated. A rebound in travel and leisure now seems unsure. Important to watch the Russia/Ukraine situation.

ECONOMIC RISKS

NEUTRAL

 Supply chain disruptions are hampering the economy; however, demand remains very strong. While global logistics are operating far below normal efficacy, it appears the supply chain is slowly improving and may reach normalcy by mid-to-late-2022.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.