"This week was a wake-up call for what we're going to be dealing with for 2022," said Grohowski. "Lower returns and more risk. Welcome to the new year."
"It's more dramatic than what we anticipated and the Fed's pivot to a more hawkish stance has been the surprise," said Grohowski. "Most market participants expected higher rates, less accommodative monetary policy, but when you look at the fed funds implying a 90% chance of a hike in March, on New Year's Eve that was just 63%. There's been a pretty dramatic change in tone picked up in the Fed minutes this week, and markets are adjusting to that.
Inflation will stay front and center with the CPI and PPI reports. Economists expect another hot month for both inflation readings, though some economists believe inflation is close to its peak.Stock investors will also continue to watch yields. Tech and growth stocks are the most sensitive to rising rates because investors pay for the promise of future earnings. Higher rates means the cost of money increases, and that changes the calculus on their investments.