As is tradition, we pen our annual letter to the Fed.

Dear Santa Powell,

Happy holidays and Merry Christmas to you and the elves at the Fed! First off, congrats for being renominated for a second term by President Joe Biden. As investors we’re glad that we know you already (nominated to the Fed Board of Governors by President Obama and then nominated as Fed Chair by President Trump) and, more importantly, that you’ll continue to guide the path that you’ve laid out for Fed policy. Once again, thank you for taking the time to read our past letters to you. When reviewing our past letters it’s amazing to see what was going on in the world at the time.

2018: We wished for a pause in interest rate hikes. What was going on in the world:

• Global economic slow down
• China / U.S. trade war
• Oil prices collapsing
• Brexit
• U.S. political divide
• Wealth gap
• Russia / Ukraine
• Rising interest rate environment
• S&P 500 ending -4.4%

2019: We wished for a pause in interest rate cuts. What was going on in the world:

• Continued weak global economic growth
• China/ U.S. trade war
• Oil prices still depressed
• Brexit
• U.S. political divide
• Wealth gap and human rights
• Presidential impeachment
• Decreasing interest rate environment
• S&P 500 ending +31.5%

2020: We wished for a pause in interest rate policy. What was going on in the world:

• Covid-19
• Global economic shutdown and restart
• China/ U.S. trade war
• Oil prices still depressed
• Brexit (finally!)
• U.S. political divide
• Wealth gap and human rights
• Green energy
• Presidential election
• Zero interest rate environment
• S&P 500 ending +18.4%

2021 has been no different, it’s still not easy being an investor. We started the year with still many unknowns: How effective were the vaccines? Could they be distributed widely and quickly enough? When would “re-opening” actually occur? We were delivered a nice surprise as re-opening began in the spring, much earlier than consensus expectations of early fall. Because of that earlier than anticipated re-opening, manufacturers and retailers were caught behind the curve, leading to supply chain issues which have led to inflation running at its hottest level since 1990. Covid-19 waves continue with the Omicron variant the latest. While we’re not seeing wholesale shutdowns of economies, we’re continuing to see some countries shutting their borders. The China / U.S. trade war seems to be in a freeze currently has both countries are focused on internal policies. The United Kingdom is still learning the negative benefits of Brexit which have been exacerbated by Covid-19. The U.S. political divide continues as January 6 remains fresh. The wealth gap and human rights continue to simmer globally with many central banks now noting the wealth gap issue in their official commentary. The United Nations COP 26 event came and went, with more and more countries agreeing to focus on climate change and green energy.

For this holiday season, we are once again asking for a “pause.” A pause on new monetary policies and to see the tapering program work its way through the system. No additional easing or tightening. While last Friday’s volatility was scary – it’s never a great feeling to see the S&P 500 down 2.3% in a day – we understand that the Omicron news that came out was unsettling. And as the VIX index shot up, many black box algorithm traders began to trade in a very thin market when most investors were on holiday. And some investors were looking to book gains before year end. We’ve been nice this year (not naughty!) and we hope that you allow the market and investors to continue to digest all of the monetary and fiscal stimulus which has been provided since March 2020 .

Sincerely,
Wall Street

Data deck for November 29–December 3: