INSIGHTS FROM FIRST FOUNDATION

A First Foundation Blog

The Week Ahead – Dear Santa

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:

Date

Indicator

Period

Nov. 29

Pending Home Sales

October

Nov. 30

Case-Shiller Home Price Index

September

Nov. 30

Chicago Purchasing Managers Index

November

Nov. 30

Consumer Confidence

November

Dec. 1

ADP Employment

November

Dec. 1

IHS-Markit Manufacturing PMI

November

Dec. 1

ISM Manufacturing

November

Dec. 1

Total Vehicles Sales

November

Dec. 2

Initial Jobless Claims

----

Dec. 3

Employment Report

November

Dec. 3

IHS-Markit Services PMI

November

Dec. 3

ISM Services

November

Dec. 3

Factory Orders

November

IMPORTANT DISCLOSURE INFORMATION    

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by First Foundation Advisors), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from First Foundation Advisors. Please remember that if you are a First Foundation client, it remains your responsibility to advise First Foundation, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. First Foundation Advisors is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the First Foundation Advisors’ current written disclosure statement discussing our advisory services and fees is available for review upon request, or at firstfoundationinc.com.  Please Note: First Foundation Advisors does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to First Foundation Advisors’ web site or incorporated herein, and takes no responsibility therefore. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Andrew Chan, CAIA, Co-Chief Investment Officer
About the Author
Andrew Chan, CAIA, Co-Chief Investment Officer
Mr. Chan co-leads the strategic investment committee and is responsible for overseeing First Foundation Advisor’s investment solutions platform which includes conducting investment manager research for both traditional and alternative investments as well as asset allocation guidance for portfolio construction. As a member of the investment committee, he provides market commentary and investment insights to clients. Additionally, Mr. Chan serves as a senior executive on the business strategy committee providing guidance on firm wide initiatives. With over 15 years of wealth management experience, Mr. Chan has played key roles across various aspects of investment and wealth management. Prior to joining First Foundation Advisors, Mr. Chan was most recently a portfolio manager at U.S. Trust where, in addition to his daily responsibilities, he served on numerous national committees including the investment manager committee, the portfolio model committee, and the strategic technology committee. He also served on the in-house strategic consultant committee reporting directly to the President of U.S. Trust. Mr. Chan is a graduate of the Wharton School Executive Program on Investment Management and holds a Bachelor of Arts degree in Business Administration from the University of California, Riverside. He is a Chartered Alternative Investment Analyst (CAIA). Mr. Chan has previously served as an exam working group member and as an exam grader for CAIA. A member of the CAIA SoCal Executive Board since 2015, Mr. Chan has served as executive chapter head since 2017. Read more