Week in Review: Feb. 21-25

I’ll admit it – I didn’t see it coming. I thought this type of nation-on-nation aggression was a thing of the past. Oh, there are conflicts between nations of course, but many of them are economic in nature or related to a limited territory (e.g., Sudan/South Sudan, Lebanon/Syria, India/Pakistan) and do not involve the sovereignty of an entire nation (obvious exception, Taiwan). This is utter madness, and the U.S. stock markets have responded by . . . rallying. At least as of Friday morning, Dow Futures were looking up. Oil prices haven’t changed that much since shelling began, nor have natural gas prices.

What has gone down is my perception of Vladimir Putin. He is more of a nutjob than I thought, and just as the world was getting ready to celebrate the end of a global pandemic…

I’ll have a longer post out later today with a few thoughts on the broader economic implications, but for now…

Monday

President’s (not named Vladimir Putin) Day

This used to be observed on and called Washington’s birthday (February 22), but that changed following the Uniform Monday Holiday Act of 1968, which made Washington’s Birthday, Memorial Day, and Labor Day always fall on a Monday. This is good policy. Nobody wants a random Tuesday off, and the creation of three-day weekends catalyzes domestic tourism.  Prior to this landmark legislation that gave us the freedom to enjoy three-day weekends, some states shut down for both Washington’s and Lincoln’s birthdays.

Tuesday

IHS Markit Flash Composite PMI™

The ISM Market Flash US Composite PMI Output Index rose from 51.1 in January to a preliminary reading of 56 in February (it’s a diffusion index whereby any reading above 50 indicates growth and any reading below 50 indicates contraction). Ok, so what does this signify? It means that growth in private sector domestic output accelerated from what was an 18-month low in January. Renewed demand for services drove the monthly increase, though the manufacturing index also expanded. On the downside, “February also saw a survey record rise in average prices charged for goods and services.”

The Conference Board Consumer Confidence Index

Consumer confidence inched lower in February and has now declined for two consecutive months. Consumers feel a little bit better about the present situation and a little bit worse about the short-term outlook. Inflation concerns were once again front and center. Given the current geopolitical situation, I expect consumer confidence will look worse this time next month, but judging by the response of the markets, I could be . . . well you know.

Housing Price Indices

Tuesday gave us two measures of home prices, and to absolutely no one’s surprise, home prices have continued to rise, evoking a particular Pixar film involving an elderly gentleman, a house, and balloons. The Federal Housing Finance Agency’s House Price Index rose 1.2% in December and is up 17.5% from Q4:2020 to Q4:2021. The S&P CoreLogic Case-Shiller US National Index posted a very similar 0.9% monthly (seasonally adjusted) increase and an 18.8% yearly increase. Housing demand has been meaningfully above housing supply, and prices have kept rising, but something is changing out there . . . which brings us to Hump Day (not an official holiday).

Wednesday