Stocks closed the week in the red as the potential of central bank tightening and concerns about the impact of the Omicron variant triggered significant volatility. Additionally, the “triple witching”, i.e. the expiration of three types of options and futures contracts on Friday contributed to the week’s volatility. The CBOE Volatility Index (VIX) increased for the week but remains below its early-month levels.
For much of the week, the FED monetary policy meeting on Tuesday and Wednesday seemed to dominate sentiment. The major indices fell strongly on Tuesday morning, due to news that producer prices increased 9.6% year over year in November, the largest increase since 2010. These fuelled expectations of the FED announcing further rate hikes in 2022. Indeed, according to the Fed’s quarterly survey of individual policymakers, most officials now forecast three quarter-point raises in 222 rather than two. The Fed also stated that its monthly asset purchases will be tapered more quickly, with the program likely to terminate by the end of March.
One Signal outperformed its benchmark index for another week and year-to-date. The S&P 500 closed the week with -1.90%, compared to One Signal Xpress returning 1.75% and One Signal Xpert returning -0.61%.