Jason Colodne of Colbeck Capital’s Second Week of January Market Rewind

News about year-over-year inflation and other economic factors seems to have weighed on investors’ outlooks during the second week of January, with the stock market experiencing declines in the latter portion of the week, says Jason Colodne, co-founder of Colbeck Capital Management, an NYC-based private equity asset management organization focused on strategic lending.

Here’s a look at some of the recent highlights.

Economic Snapshot

Data released Wednesday by the U.S. Bureau of Labor Statistics (BLS) showed the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5% in December on a seasonally adjusted basis, following an 0.8% rise in November.

The CPI-U measures the change in prices paid by consumers in urban or metropolitan areas for goods and services; this index reflects spending patterns for 93% of the U.S. population.

Surges in the indexes for shelter and used cars and trucks contributed the largest amount toward the index’s increase; food also was a factor, although less so than in recent months, according to the BLS. Over the past year, the index has risen 7.0% — the biggest 12-month increase since 1982.

On Thursday, the BLS also released the most recent results for the Producer Price Index — measuring commodities sold for personal consumption, capital investment, government, and export — which revealed an 0.2% increase in December 2021.

Prices for services rose 0.5%, after increasing 0.9% in November, and the index for goods decreased 0.4% in December, following a 0.4% drop in the prior month.

In 2021, prices rose 9.7% — which, according to the BLS, marks the largest calendar-year increase since data were first calculated in 2010.  

The monthly statement issued by the Treasury Department this week also showed the federal budget deficit was $377 billion in the first fiscal quarter of 2022— which is $196 billion less than the deficit during the same period a year ago, according to a Congressional Budget Office analysis of the data.

Total outlays were up 4%, and total receipts increased by 31% in the first three months of the 2022 fiscal year.

The U.S. budget deficit declined considerably, compared to its December 2020 level, reaching $21 billion in December 2021 — $123 billion less than the previous year’s deficit amount.

Due to refundable tax credit payments, net outlays for the interest on public debt, and other expenses, total spending for the month was $507 billion, which is actually higher than in December 2020. The increase, though, was offset by factors such as the receipt of individual income and payroll taxes.

The government would have actually experienced a $4 billion surplus last month, if a number of government benefit payments that typically would have occurred in January hadn’t been shifted to December to avoid the dates falling on a holiday or weekend.

Recent Market Activity

Continued concerns about the effect of the COVID-19 omicron variant’s rapid spread throughout the U.S., in addition to other economic factors, prompted uneven performance in the stock market this week.

The S&P 500 began the week with a 0.1% decline on Monday; although it made a somewhat uneven climb throughout the middle of the week, Thursday showed a notable drop, with the index declining 1.4% for the day by closing.

Excluding Friday’s closing results, which were not available at the time this recap was written, the S&P continued to slide lower through much of Friday morning.

After sinking to its lowest point in the week on Monday, the Dow Jones Industrial Average experienced a mostly upward trajectory during the week, with the exception of significant dips on Monday and Tuesday morning; however, on Thursday it declined 0.5%. The Dow was also down on Friday.

Following three days of climbing upward, the Nasdaq Composite sank on Thursday, experiencing a 2.5% drop — which some sources, including CNBC, attributed in part to tech stock volatility. By midafternoon on Friday, its value was lower than Thursday’s close, after rising and falling earlier in the day.

About Jason Colodne

Jason Colodne is the senior transaction partner at Colbeck Capital Management and oversees all aspects of investment execution and portfolio management. Colodne co-founded Colbeck Capital Management as a managing partner in 2009. Colodne’s investment experience spans over two decades.

About Colbeck Capital Management

Colbeck Capital Management (colbeck.com) is a leading middle-market private credit manager focused on strategic lending. Colbeck partners with companies during periods of transition, providing creative capital solutions. Colbeck sponsors its portfolio companies through consistent engagement with management teams in areas such as finance, capital markets and growth strategies, distinguishing itself from traditional lenders. Founded in 2009 by Jason Colodne and Jason Beckman, the principals have extensive experience investing through different market cycles at leading institutions, including Goldman Sachs and Morgan Stanley.

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