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Volatility continued on Monday with the equities swinging down in the morning and back up in the afternoon. The Nasdaq fell below its December low before finishing the day up 0.05 percent. The S&P 500 Index fell 0.14 percent, the Dow Jones Industrial Average 0.45 percent and the Russell 2000 Index 0.40 percent.

SPDR Healthcare (XLV) climbed 1.02 percent on Monday. Technology shares rebounded after the 10-year yield eased back from 1.80 percent down to 1.78 percent. After leading the market lower for most of the day, SPDR Technology (XLK) finished up 0.02 percent. The next best performer was SPDR Energy (XLE), down 0.31 percent.

The volatility seen on Monday could continue the rest of this week. On Tuesday, Federal Reserve Chairman Jay Powell will have his confirmation hearing with the Senate. In November, he sparked some market selling with his hawkish statements. His nomination could spark more pointed criticism from Senators who are hearing from constituents about high inflation.

In addition to Powell, three other Federal Reserve bank presidents speak publicly this week. Two have made hawkish comments in the past couple of months. Cleveland Fed President Mester has been the most hawkish. She’s called for a March rate hike and for asset sales starting in July.

On Wednesday, the consumer price index will be released. Economists project a 0.4 percent rise in December and 0.5 percent for core CPI. Headline CPI will likely hit 7.0 percent for the year.

The producer price index will be released on Thursday. Analysts expect 0.4 percent growth in December.

On Friday, retail sales for December will be released. Analysts project sales fell 0.1 percent, with sales ex-autos up 0.3 percent.

Friday will also be the unofficial kickoff of earnings season with megabanks J.P Morgan (JPM), Wells Fargo (WFC) and Citibank (C) delivering results. Economists project S&P 500 earnings rose 21.7 percent in the last quarter, driven by energy, materials and industrial firms.

Crude oil will play a crucial role in inflation expectations over the coming weeks. West Texas Intermediate crude fell to $78.23 per barrel on Monday, down from a high above $80 last week. Crude has reversed all its losses D by the Fed’s hawkish policy shift and the omicron variant outbreak last year, but it remains below its recent high above $85 in October.

Equity markets enjoyed a strong 2021 thanks to the economic reopening and the Federal Reserve’s loose monetary policy. The S&P 500 Index gained 26.89 percent, the Nasdaq 21.39 percent, the Dow Jones Industrial Average 18.73 percent and the Russell 2000 Index 13.81 percent.

Energy, real estate and financials were the best performing sectors. SPDR Energy (XLE), Real Estate (XLRE) and Financial (XXLF) increased 53.25 percent, 46.13 percent and 34.80 percent, respectively. All benefited either from inflation or the rising interest rates that accompanied it.

As the calendar turns into 2022, investors will focus on how the Federal Reserve will address inflation. The Federal Reserve was supposed to taper starting in November, but it reversed the taper in December and increased its balance sheet instead. The year ended with the market pricing in a June rate hike, but some speculators anticipate the Fed could move as early as March.

The consumer price index hit 6.8 percent in November, the last reported reading in calendar year 2021. December’s number will be out in January. With oil prices recovering most of their omicron-related dip in November, consumer inflation may already be above 7 percent. The producer price index will likely climb into the double-digits. The last time inflation was this high in the early 1980s.

The threat from rising inflation derailed the fortunes of profitless technology companies and boosted the attractiveness of companies with stable earnings. Similar to bond prices, profits that will be generated years from now are worth less with higher inflation, whereas immediate earnings are more attractive. As a result, funds that own more quality firms such as Vanguard Dividend Appreciation (VIG) and iShares MSCI Minimum Volatility USA (USMV) saw returns of 24.71 percent and 21.80 percent in 2021. Both funds beat the S&P 500 Index in the final two months of the year after the Fed announced it would taper. VIG climbed 5.21 percent and USMV 4.98 percent, compared to SPDR S&P 500’s (SPY) 3.98 percent return.

The 10-year Treasury yield started the year at 0.90 percent and finished at 1.51 percent, making a high at 1.75 percent in March 2021. If inflation is not controlled in 2022, the 10-year could move above 2 percent over the next few months. Bond investors anticipate the Fed is correct about inflation declining in 2022 though, hence the very low interest rates on longer-term bonds.

Commodities did well in 2021, but many peaked in May. Readers may recall lumber surging. The futures contract touched $1,700 in early May and fell below $500 in August, but was back above $1,100 at year-end. Copper peaked at $4.90 per pound in May, up from $3.50 at the start of the year. It finished the year at $4.45 per pound. Agricultural commodities kept rising throughout the year. Wheat climbed from $6.25 to $7.75 per bushel. Crude oil saw choppy trading during the year, but remained in an uptrend through 2021, starting from $48 per barrel and finishing the year at $75 per barrel.

At the end of the year, the Atlanta Federal Reserve’s GDP Now model predicted 7.6 percent GDP growth. The blue-chip economist consensus is lifting estimates and now at 6 percent. The government will report its first estimate in late January 2022.