loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation costs and toys.

Americans found themselves with a lot of money in the bank, and as they spent that money on goods, demand collided with a global supply chain that was too fragile to catch up.

Virus outbreaks shut down factories, ports faced backlogs and a dearth of truckers roiled transit routes. Americans still managed to buy more goods than ever before in 2021, and foreign factories sent a record sum of products to U.S. shops and doorsteps. But all that shopping wasn’t enough to satisfy consumer demand.

stop spending at the start of the pandemic helped to swell savings stockpiles.

And the Federal Reserve’s interest rates are at rock bottom, which has bolstered demand for big purchases made on credit, from houses and cars to business investments like machinery and computers. Families have been taking on more housing and auto debt, data from the Federal Reserve Bank of New York shows, helping to pump up those sectors.

But if stimulus-driven demand is fueling inflation, the diagnosis could come with a silver lining. It may be easier to temper consumer spending than to rapidly reorient tangled supply lines.

People may naturally begin to buy less as government help fades. Spending could shift away from goods and back toward services if the pandemic abates. And the Fed’s policies work on demand — not supply.

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Stock Markets Off to Worst Start Since 2016 as Fed Fights Inflation

After falling for a fourth day in a row on Friday, the stock market suffered its worst week in nearly two years, and so far in January the S&P 500 is off to its worst start since 2016. Technology stocks have been hit especially hard, with the Nasdaq Composite Index dropping more than 10 percent from its most recent high, which qualifies as a correction in Wall Street talk.

That’s not all. The bond market is also in disarray, with rates rising sharply and bond prices, which move in the opposite direction, falling. Inflation is red hot, and supply chain disruptions continue.

Until now, the markets looked past such issues during the pandemic, which brought big increases in the value of all kinds of assets.

Yet a crucial factor has changed, which gives some market watchers reason to worry that the recent decline may be consequential. That element is the Federal Reserve.

intervened to save desperately wounded financial markets back in early 2020.

This could be a good thing if it beats back inflation without derailing the economic recovery. But removing this support also inevitably cools the markets as investors move money around, searching for assets that perform better when interest rates are high.

“The Fed’s policies basically got the current bull market started,” said Edward Yardeni, an independent Wall Street economist. “I don’t think they are going to end it all now, but the environment is changing and the Fed is responsible for a lot of this.”

The central bank is tightening monetary policy partly because it has worked. It helped stimulate economic growth by holding short-term interest rates near zero and pumping trillions of dollars into the economy.

This flood of easy money also contributed to the rapid rise in prices of commodities, like food and energy, and financial assets, like stocks, bonds, homes and even cryptocurrency.

said in 1955, the central bank finds itself acting as the adult in the room, “who has ordered the punch bowl removed just when the party was really warming up.”

The mood of the markets shifted on Jan. 5, Mr. Yardeni said, when Fed officials released the minutes of their December policymaking meeting, revealing that they were on the verge of embracing a much tighter monetary policy. A week later, new data showed inflation climbing to its highest level in 40 years.

Putting the two together, it seemed, the Fed would have no choice but to react to curb rapidly rising prices. Stocks began a disorderly decline.

Financial markets now expect the Fed to raise its key interest rate at least three times this year and to start to shrink its balance sheet as soon as this spring. It has reduced the level of its bond buying already. Fed policymakers will meet next week to decide on their next steps, and market strategists will be watching.

Low interest rates made certain sectors especially appealing, foremost among them tech stocks. The S&P 500 information technology sector, which includes Apple and Microsoft, has risen 54 percent on an annualized basis since the market’s pandemic-induced trough in March 2020. One reason for this is that low interest rates amplify the value of the expected future returns of growth-oriented companies like these. If rates rise, this calculus can change abruptly.

The very prospect of higher interest rates has made technology the worst-performing sector in the S&P 500 this year. Since its peak in late December, it has fallen more than 11 percent.

The S&P’s three best-performing sectors in the early days of 2022, on the other hand, are energy, financial services and consumer staples.

like Netflix and Peloton, have begun to flag as people venture out more.

Some astute market analysts foresee bigger problems. Jeremy Grantham, one of the founders of GMO, an asset manager, predicts a catastrophic end to what he calls a “superbubble.”

But the current losses could be beneficial if they let a little air out of a potential bubble, without bursting investor portfolios. This year’s declines erase only a small share of the market’s gains in recent years: The S&P 500 rose nearly 27 percent last year, more than 16 percent in 2020 and nearly 29 percent in 2019.

And the prospects for corporate earnings remain good. Once the Fed starts to act, and the effects are better understood, the stock market party could continue — at a less giddy pace.

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Your Inflation Questions, Answered

Inflation is high and has been for months. It’s weighing on consumer confidence, making policymakers nervous and threatening to eat away at household paychecks well into 2022.

This is the first time many adults have experienced meaningful inflation: Price gains had been largely quiescent since the late 1980s. When the Consumer Price Index climbed 7 percent in the year through December, it was the fastest pace since 1982.

Naturally, people have questions about what this will mean for their pocketbooks, their finances and their economic futures.

Closely intertwined with price worries are concerns about interest rates: The Federal Reserve is poised to raise borrowing costs to try to slow down demand and keep the situation under control.

furniture and camping gear.

That rapid consumption is running up against constrained supply. Factories shut down early in the pandemic, and in parts of Asia, they continue to do so as Omicron cases surge. There aren’t enough containers to ship all of the goods people want to buy, and ports have become clogged trying to process so many imports.

expanding their profits.

In theory, competition should eat away at extra earnings over time. New firms should jump into the market to sell that same products for less and steal away the customer. Existing competitors should ramp up production to meet demand.

But this may be a unappealing time for new firms to enter the market. Established companies may be hesitant to expand production if doing so involved a lot of investment, because it is not clear how long today’s strong demand will last.

“It is a very uncertain environment,” said Matthew Luzzetti, chief U.S. economist at Deutsche Bank. “A new firm stepping in is a lot of investment, with a lot of financial risk.”

Until companies can produce and transport enough of a given product to go around — as long as shortages remain — companies will be able to raise prices without running much risk of losing customers to a competitor.

In past periods of inflation, do employers typically increase wages or award higher-than-average yearly increases to help employees offset inflation? If so, in what industries is this practice most common? — Annmarie Kutz, Erie, Pa.

There is no standard historical experience with wages and inflation, Mary C. Daly, president of the Federal Reserve Bank of San Francisco, said during an interview with The New York Times on Twitter Spaces last week.

lower-wage service industries have been competing mightily for workers in recent months, and pay is climbing faster there.

“The history isn’t so clear that cost of living translates into higher wages, but that’s largely because inflation has been low and stable for a very long time,” Ms. Daly said.

in December projected that price gains will drop back below 3 percent by the end of the year, and will level off to normal levels over the longer term.

are adjusted for inflation, so those should keep pace with price gains. Bonds that pay back fixed rates do less well during periods of inflation, while stock investments — though riskier — tend to rise more quickly than consumer prices. Ms. Benz recommends holding assets across an array of securities, potentially including inflation-protected securities such as some exchange-traded funds or Treasury Inflation Protected Securities, commonly called TIPS.

“It argues against having too much in cash,” Ms. Benz said. “That’s too much dead money.”

We currently have low unemployment, strong wage growth (largely through attrition / voluntary retirements), easy monetary policy and now rising inflation. What are other periods of time when the United States had these conditions? How did things work out then? — Harshal Patel, Moorestown, N.J.

Jared Bernstein, a member of the White House Council of Economic Advisers, pointed to the post-World War II period as a reference point for the present moment.

“Demand was strong, and supply was constrained,” he said in an interview. “That’s a very instructive path for us.”

The good news about that example is that supply eventually caught up, and prices came down without spurring any greater crisis.

Other, more worried commentators have drawn parallels between now and the 1970s, when the Fed was slow to raise rates as unemployment fell and prices rose — and inflation jumped out of control. But many economists have argued that important differences separate that period from this one: Workers were more heavily unionized and may have had more bargaining power to push for higher wages back then, and the Fed was slow to react for years on end. This time, it’s already gearing up to respond.

about price controls in a recent article, and vocal minority think the 1970s experience unfairly tarnished the idea and that it might be worthwhile to reopen the debate.

“This is a great suppressed topic,” said James K. Galbraith, an economist at the University of Texas. “It was absolutely mainstream from the start of World War II until the Reagan administration.”

If inflation is being caused by supply chain problems, how will raising interest rates help? — Larry Harris, Ventura, Calif.

Kristin J. Forbes, an economist at the Massachusetts Institute of Technology, said that a big part of today’s inflation ties to roiled supply chains, which monetary policy can’t do much to fix.

But trade is actually happening at elevated levels even amid the disruptions. Factories are producing, ships are shipping, and consumers are buying at a rapid clip. It is just that supply is not keeping up with that booming demand. Higher interest rates can relieve pressure on demand, making it more expensive to buy a boat or a car, cooling off the housing market and slowing business investment.

“A good part of the supply chain problems, you can’t do anything about,” Ms. Forbes said. “But you can affect demand. And it is the combination of the two which determines inflation.”

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Can Anyone Satisfy Amazon’s Craving for Electric Vans?

That number is growing quickly. Amazon is several years — and tens of billions of dollars — into a huge push to deliver packages, shifting away from relying on large carriers like UPS. To begin the expansion, Amazon ordered 20,000 diesel Sprinter vans from Mercedes-Benz.

Through its network of contractors, Amazon now delivers more than half of its orders globally, and far more in the United States. Amazon has six times as many delivery depots now as it did in 2017, with at least 50 percent more new facilities set to open this year, according to data from MWPVL, a logistics consultancy.

That logistics boom, accelerated by the pandemic’s shift to online shopping, multiplies the challenges the company faces in meeting its pledge to reduce its climate impact. Its vow to make half of its deliveries carbon-neutral by 2030 is part of the company’s broader pledge to be net-carbon-neutral by 2040.

“Electrification of their delivery fleet is a really important part of that strategy,” said Anne Goodchild, who leads the University of Washington’s work on supply chain, logistics and freight transportation.

Delivery vans are well suited to electric propulsion because they usually travel 100 miles or under in a day, which means they don’t need large battery packs that add to the cost of electric cars. Delivery trucks are often used during the day and can be recharged overnight, and usually require less maintenance than gasoline trucks. Electric vehicles don’t have transmissions and certain other mechanical components that wear out quickly in the heavy stop-and-go typical in delivery routes.

In September 2019, when Mr. Bezos announced Amazon’s huge Rivian order — the largest ever order of electric vehicles — he positioned it as central to Amazon’s commitment to reduce its carbon footprint. At the time, he said he expected the 100,000 vans to be on the road “by 2024.”

Amazon invested at least $1.3 billion in Rivian, which Amazon says is supposed to make 10,000 vans as early as this year. Amazon also locked up exclusive rights to Rivian’s commercial vans for four years, with the right of first refusal for two years after that. The companies have been testing the vans for almost a year.

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Supply Chain Woes Could Worsen as China Imposes Covid Lockdowns

WASHINGTON — Companies are bracing for another round of potentially debilitating supply chain disruptions as China, home to about a third of global manufacturing, imposes sweeping lockdowns in an attempt to keep the Omicron variant at bay.

The measures have already confined tens of millions of people to their homes in several Chinese cities and contributed to a suspension of connecting flights through Hong Kong from much of the world for the next month. At least 20 million people, or about 1.5 percent of China’s population, are in lockdown, mostly in the city of Xi’an in western China and in Henan Province in north-central China.

The country’s zero-tolerance policy has manufacturers — already on edge from spending the past two years dealing with crippling supply chain woes — worried about another round of shutdowns at Chinese factories and ports. Additional disruptions to the global supply chain would come at a particularly fraught moment for companies, which are struggling with rising prices for raw materials and shipping along with extended delivery times and worker shortages.

China used lockdowns, contact tracing and quarantines to halt the spread of the coronavirus nearly two years ago after its initial emergence in Wuhan. These tactics have been highly effective, but the extreme transmissibility of the Omicron variant poses the biggest test yet of China’s system.

Volkswagen and Toyota announced last week that they would temporarily suspend operations in Tianjin because of lockdowns.

Analysts warn that many industries could face disruptions in the flow of goods as China tries to stamp out any coronavirus infections ahead of the Winter Olympics, which will be held in Beijing next month. On Saturday, Beijing officials reported the city’s first case of the Omicron variant, prompting the authorities to lock down the infected person’s residential compound and workplace.

If extensive lockdowns become more widespread in China, their effects on supply chains could be felt across the United States. Major new disruptions could depress consumer confidence and exacerbate inflation, which is already at a 40-year high, posing challenges for the Biden administration and the Federal Reserve.

“Will the Chinese be able to control it or not I think is a really important question,” said Craig Allen, the president of the U.S.-China Business Council. “If they’re going to have to begin closing down port cities, you’re going to have additional supply chain disruptions.”

thrown the global delivery system out of whack. Transportation costs have skyrocketed, and ports and warehouses have experienced pileups of products waiting to be shipped or driven elsewhere while other parts of the supply chain are stymied by shortages.

For the 2021 holiday season, customers largely circumvented those challenges by ordering early. High shipping prices began to ease after the holiday rush, and some analysts speculated that next month’s Lunar New Year, when many Chinese factories will idle, might be a moment for ports, warehouses and trucking companies to catch up on moving backlogged orders and allow global supply chains to return to normal.

But the spread of the Omicron variant is foiling hopes for a fast recovery, highlighting not only how much America depends on Chinese goods, but also how fragile the supply chain remains within the United States.

American trucking companies and warehouses, already short of workers, are losing more of their employees to sickness and quarantines. Weather disruptions are leading to empty shelves in American supermarkets. Delivery times for products shipped from Chinese factories to the West Coast of the United States are as long as ever — stretching to a record high of 113 days in early January, according to Flexport, a logistics firm. That was up from fewer than 50 days at the beginning of 2019.

The Biden administration has undertaken a series of moves to try to alleviate bottlenecks both in the United States and abroad, including devoting $17 billion to improving American ports as part of the new infrastructure law. Major U.S. ports are handling more cargo than ever before and working through their backlog of containers — in part because ports have threatened additional fees for containers that sit too long in their yards.

Yet those greater efficiencies have been undercut by continuing problems at other stages of the supply chain, including a shortage of truckers and warehouse workers to move the goods to their final destination. A push to make the Port of Los Angeles operate 24/7, which was the centerpiece of the Biden administration’s efforts to address supply chain issues this fall, has still seen few trucks showing up for overnight pickups, according to port officials, and cargo ships are still waiting for weeks outside West Coast ports for their turn for a berth to dock in.

work slowdowns and shipping delays.

“If you have four closed doors to get through and one of them opens up, that doesn’t necessarily mean quick passage,” said Phil Levy, the chief economist at Flexport. “We should not delude ourselves that if our ports become 10 percent more efficient, we’ve solved the whole problem.”

Chris Netram, the managing vice president for tax and domestic economic policy at the National Association of Manufacturers, which represents 14,000 companies, said that American businesses had seen a succession of supply chain problems since the beginning of the pandemic.

“Right now, we are at the tail end of one flavor of those challenges, the port snarls,” he said, adding that Chinese lockdowns could be “the next flavor of this.”

Manufacturers are watching carefully to see whether more factories and ports in China might be forced to shutter if Omicron spreads in the coming weeks.

Neither Xi’an nor Henan Province, the site of China’s most expansive lockdowns, has an economy heavily reliant on exports, although Xi’an does produce some semiconductors, including for Samsung and Micron Technology, as well as commercial aircraft components.

Handel Jones, the chief executive of International Business Strategies, a chip consultancy, said the impact on Samsung and Micron would be limited, but he expressed worries about the potential for broader lockdowns in cities like Tianjin or Shanghai.

stay away from any vehicle collisions involving Olympic participants, to avoid infection.

Last year, terminal shutdowns in and around Ningbo and Shenzhen, respectively the world’s third- and fourth-largest container ports by volume, led to congestion and delays, and caused some ships to reroute to other ports.

But if the coronavirus does manage to enter a big port again, the effects could quickly be felt in the United States. “If one of the big container terminals goes into lockdown,” Mr. Huxley said, “it doesn’t take long for a big backlog to develop.”

Airfreight could also become more expensive and harder to obtain in the coming weeks as China has canceled dozens of flights to clamp down on another potential vector of infection. That could especially affect consumer electronics companies, which tend to ship high-value goods by air.

For American companies, the prospect of further supply chain troubles means there may be another scramble to secure Chinese-made products ahead of potential closures.

Lisa Williams, the chief executive of the World of EPI, a company that makes multicultural dolls, said the supply chain issues were putting pressure on companies like hers to get products on the shelves faster than ever, with retailers asking for goods for the fall to be shipped as early as May.

Dr. Williams, who was an academic specializing in logistics before she started her company, said an increase in the price of petroleum and other raw materials had pushed up the cost of the materials her company uses to make dolls, including plastic accessories, fibers for hair, fabrics for clothing and plastic for the dolls themselves. Her company has turned to far more expensive airfreight to get some shipments to the United States faster, further cutting into the firm’s margins.

“Everything is being moved up because everyone is anticipating the delay with supply chains,” she said. “So that compresses everything. It compresses the creativity, it compresses the amount of time we have to think through innovations we want to do.”

Ana Swanson reported from Washington, and Keith Bradsher from Beijing.

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Supply Chain Woes Prompt a New Push to Revive U.S. Factories

When visitors arrive at the office of America Knits in tiny Swainsboro, Ga., the first thing they see on the wall is a black-and-white photo that a company co-founder, Steve Hawkins, discovered in a local antiques store.

It depicts one of a score of textile mills that once dotted the area, along with the workers that toiled on its machines and powered the local economy. The scene reflects the heyday — and to Mr. Hawkins, the potential — of making clothes in the rural South.

Companies like America Knits will test whether the United States can regain some of the manufacturing output it ceded in recent decades to China and other countries. That question has been contentious among workers whose jobs were lost to globalization. But with the supply-chain snarls resulting from the coronavirus pandemic, it has become intensely tangible from the consumer viewpoint as well.

Mr. Hawkins’s company, founded in 2019, has 65 workers producing premium T-shirts from locally grown cotton. He expects the work force to increase to 100 in the coming months. If the area is to have an industrial renaissance, it is so far a lonely one. “I’m the only one, the only crazy one,” Mr. Hawkins said.

General Motors disclosed in December that it was considering spending upward of $4 billion to expand electric vehicle and battery production in Michigan. Just days later, Toyota announced plans for a $1.3 billion battery plant in North Carolina that will employ 1,750 people.

little change in the balance of trade or the inclination of companies operating in China to redirect investment to the United States.

Since the pandemic began, however, efforts to relocate manufacturing have accelerated, said Claudio Knizek, global leader for advanced manufacturing and mobility at EY-Parthenon, a strategy consulting firm. “It may have reached a tipping point,” he added.

Decades of dependence on Asian factories, especially in China, has been upended by delays and surging freight rates — when shipping capacity can be found at all.

Backups at overwhelmed ports and the challenges of obtaining components as well as finished products in a timely way have convinced companies to think about locating production capacity closer to buyers.

“It’s absolutely about being close to customers,” said Tim Ingle, group vice president for enterprise strategy at Toyota Motor North America. “It’s a big endeavor, but it’s the future.”

New corporate commitments to sustainability are also playing a role, with the opportunity to reduce pollution and fossil fuel consumption in transportation across oceans emerging as a selling point.

Repositioning the supply chain isn’t just an American phenomenon, however. Experts say the trend is also encouraging manufacturing in northern Mexico, a short hop to the United States by truck.

traced to the outbreak of Covid-19, which triggered an economic slowdown, mass layoffs and a halt to production. Here’s what happened next:

“Incentives to help level the playing field are a key piece,” said David Moore, chief strategy officer and senior vice president at Micron. “Building a leading-edge memory fabrication facility is a sizable investment; it’s not just a billion or two here and there. These are major decisions.”

In the aftermath of the coronavirus and restrictions on exports of goods like masks, moving manufacturing closer to home is also being viewed as a national security priority, said Rick Burke, a managing director with the consulting firm Deloitte.

“As the pandemic continues, there’s a realization that this may be the new normal,” Mr. Burke said. “The pandemic has sent a shock wave through organizations. It’s no longer a discussion about cost, but about supply-chain resiliency.”

Despite the big announcements and the billions being spent, it could take until the late 2020s before the investments yield a meaningful number of manufacturing jobs, Mr. Burke said — and even then, raw materials and some components will probably come from overseas.

Still, if the experts are correct, these moves could reverse decades of dwindling employment in American factories. A quarter of a century ago, U.S. factories employed more than 17 million people, but that number dropped to 11.5 million by 2010.

Since then, the gains have been modest, with the total manufacturing work force now at 12.5 million.

But the sector remains one of the few where the two-thirds of Americans who lack a college degree can earn a middle-class wage. In bigger cities and parts of the country where workers are unionized, factories frequently pay $20 to $25 an hour compared with $15 or less for jobs at warehouses or in restaurants and bars.

Even in the rural South, long resistant to unions, manufacturing jobs can come with a healthy salary premium. At America Knits, a private-label manufacturer that sells to retailers including J. Crew and Buck Mason, workers earn $12 to $15 an hour, compared with $7.50 to $11 in service jobs.

The hiring is being driven by strong demand for the company’s T-shirts, Mr. Hawkins said, as well as by a recognition among retailers of the effect of supply-chain problems on foreign sources of goods.

“Retailers have opened their eyes more and are bringing manufacturing back,” he said. “And with premium T-shirts selling for $30 or more, they can afford to.”

A few years ago, Julie Land said she would naturally have looked to Asia to expand production of outerwear and other goods for her Canadian company, Winnipeg Stitch Factory, and its clothing brand, Pine Falls.

Instead, the 12-year-old business is opening a plant in Port Gibson, Miss., in 2022. Fabric will be cut in Winnipeg and then shipped to Port Gibson to be sewn into garments like jackets and sweaters. The factory will be heavily automated, Ms. Land said, enabling her company to keep costs manageable and compete with overseas workshops.

“Reshoring is not going to happen overnight, but it is happening, and it’s exciting,” she said. “If you place an order offshore, there is so much uncertainty with a longer lead time. All of that adds up.”

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Fed’s Moves in 2022 Could End the Stock Market’s Pandemic Run

For two years, the stock market has been largely able to ignore the lived reality of Americans during the pandemic — the mounting coronavirus cases, the loss of lives and livelihoods, the lockdowns — because of underlying policies that kept it buoyant.

Investors can now say goodbye to all that.

Come 2022, the Federal Reserve is expected to raise interest rates to fight inflation, and government programs meant to stimulate the economy during the pandemic will have ended. Those policy changes will cause investors, businesses and consumers to behave differently, and their actions will eventually take some air out of the stock market, according to analysts.

“It’s going to be the first time in almost two years that the Fed’s incremental decisions might force investors or consumers to become a little more wary,” said David Schawel, the chief investment officer at Family Management Corporation, a wealth management firm in New York.

At year’s end, the overarching view on Wall Street is that 2022 will be a bumpier ride, if not quite a roller coaster. In a recent note, analysts at J.P. Morgan said that they expected inflation — currently at 6.8 percent — to “normalize” in coming months, and that the surge of the Omicron variant of the coronavirus was unlikely to lower economic growth.

16 percent gain during the first year of the pandemic. The index hit 70 new closing highs in 2021, second only to 1995, when there were 77, said Howard Silverblatt, an analyst at S&P Dow Jones Indices. Shares on Friday fell slightly.

The market continued to rise through political, social and economic tensions: On Jan. 7, the day after a pro-Trump mob stormed the U.S. Capitol, the S&P set another record. Millions of amateur investors, stuck at home during the pandemic, piled into the stock market, too, buying up shares of all kinds of companies — even those that no one expects will earn money, like the video game retailer GameStop.

Wall Street also remained bullish on business prospects in China despite Beijing’s growing tension with the United States and tightening grip on Chinese companies. Waves of coronavirus variants, from Delta to Omicron, and a global death toll that crossed five million did not deter the stock market’s rise; its recovery after each bout of panic was faster than the previous one.

“2021 was a terrific year for the equity markets,” said Anu Gaggar, the global investment strategist for Commonwealth Financial Network, in an emailed note. “Between federal stimulus keeping the economy going, easy monetary policy from the Fed keeping markets liquid and interest rates low, and the ongoing medical improvement leading to surprising growth, markets have been in the best of all possible worlds.”

400 private companies raised $142.5 billion in 2021. But investors had sold off many of the newly listed stocks on the New York Stock Exchange or Nasdaq by the end of the year. The Renaissance IPO exchange-traded fund, which tracks initial public offerings, is down about 9 percent for the year.

Shares of Oatly, which makes an oat-based alternative to dairy milk, soared 30 percent when the company went public in May but are now trading 60 percent lower than their opening-day closing price. The stock-trading start-up Robinhood and the dating app Bumble, two other big public debuts, were down about 50 percent for 2021.

supply chain disruptions stemming from the pandemic. Prices for used cars skyrocketed amid a global computer chip shortage. As Covid-19 vaccination rates improved, businesses trying to reopen had to raise wages to attract and retain employees. Consumer prices climbed 5.7 percent in November from a year earlier — the fastest pace since 1982.

But even when “inflation” had become a buzzword worthy of a headline in The Onion, the stock market appeared slow to react to price increases.

“The market is on the side that inflation is transitory,” said Harry Mamaysky, a professor at Columbia Business School. “If it’s not and the Fed needs to go in and raise interest rates to tame inflation, then things could get a lot worse in terms of markets and economic growth.”

And that is what the Fed has signaled it will do in 2022.

When interest rates go up, borrowing becomes more expensive for both consumers and companies. That can hurt profit margins for companies and make stocks less attractive to investors, while sapping consumer demand because people have less money to spend if their mortgage and other loan payments go up. Over time, that tends to deflate the stock market and reduce demand, which brings inflation back under control.

loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation costs and toys.

Mr. McBride said the values of many stocks were being supported by extremely low yields on Treasury bonds, especially the 10-year yield, which has held to about 1.5 percent.

“If that yield moves up, investors are going to re-evaluate how much they’re willing to pay for per dollar of earnings for stocks,” he said. Even if corporate profits — which were strong in 2021 — continue to grow in 2022, he added, they are unlikely to expand “at a pace that continues to justify the current price of stocks.”

quicken the pace of pulling back on that aid, set to finish in March.

“The nightmare scenario is: The Fed tightens and it doesn’t help,” said Aaron Brown, a former risk manager of AQR Capital Management who now manages his own money and teaches math at New York University’s Courant Institute of Mathematical Sciences. Mr. Brown said that if the Fed could not orchestrate a “soft landing” for the economy, things could start to get ugly — fast.

And then, he said, the Fed may have to take “very aggressive action like a rate hike to 15 percent, or wage and price controls, like we tried in the ’70s.”

By an equal measure, the Fed’s moves, even if they are moderate, could also cause a sell-off in stocks, corporate bonds and other riskier assets, if investors panic when they realize that the free money that drove their risk-taking to ever greater extremes over the past several years is definitely going away.

Sal Arnuk, a partner and co-founder of Themis Trading, said he expected 2022 to begin with something like “a hiccup.”

“China and Taiwan, Russia and Ukraine — if something happens there or if the Fed surprises everyone with the speed of the taper, there’s going to be some selling,” Mr. Arnuk said. “It could even start in Bitcoin, but then people are going to start selling their Apple, their Google.”

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Bowman Expands Texas Operations Through Acquisition of Houston and San Antonio based Terra Associates, Inc.

RESTON, Va.–(BUSINESS WIRE)–Bowman Consulting Group Ltd. (the “Company” or “Bowman”) (NASDAQ: BWMN), today announced it had entered into a definitive purchase agreement for the acquisition of Terra Associates, Inc. (“Terra”). Closing is scheduled to occur on December 31, 2021, subject to customary closing conditions. Headquartered in Houston, Texas, Terra delivers civil design and engineering solutions to clients focused on traffic and transportation planning, water-wastewater solutions, landscape and irrigation systems, office and industrial facilities, and multi-family development. Under the continuing leadership of Vickie Henkel, Terra’s staff of 30+ professionals work from offices in Houston and San Antonio for both public and private sector clients. In connection with their water-wastewater practice, Terra serves in the role of District Engineer for several Texas-based Municipal Utility Districts (MUDs).

“Terra is a company with a forty-year heritage of serving eastern Texas,” said Gary Bowman, CEO of Bowman. “The leadership of Terra has surrounded themselves with a team of committed and energetic professionals who will all be great additions to Bowman. We have been intent on growing our Texas operations and this acquisition, following closely on the heels of our acquisition of 1519 Surveying, fortifies Bowman’s presence in the Lone Star state. Terra’s experience in commercial site work, transportation design and utility district services are highly complementary to our portfolio of services and align with our growth plans and evolving market demand. I am pleased to welcome everyone at Terra to Bowman and I am excited about the potential for our future together.”

“Choosing to join Bowman was an easy decision,” said Vickie Henkel, CEO of Terra. “Bowman’s approach to growth is very exciting to all of us at Terra. We’ve gotten to know the leadership at Bowman over the course of the acquisition process and we all feel very comfortable with the decision. Their commitment to helping our leadership and staff grow without changing the core of who we are is a big part of what makes us excited about this opportunity. The opportunity to be a part of an entrepreneurial public company is both exciting and energizing. We are all looking forward to the future as a Bowman company.”

The acquisition, which the Company expects to be immediately accretive, was financed with a combination of cash, seller financing, and stock. The Company expects the Terra acquisition to initially contribute approximately $5.5 million of annualized net service billing.

“We are continuing to execute on our commitment to growth at a reasonable price,” said Bruce Labovitz, Bowman’s CFO. “This will be our last acquisition in 2021, and it brings our annualized acquired revenue for the year to approximately $36 million. The Terra acquisition is within our target multiple range and it meets all of our objectives for operating performance metrics. As is our practice, we will provide more detailed information on M&A activities and pipeline in connection with scheduled quarterly communications.”

About Terra, Inc.

Terra Associates, Inc. (Terra) has provided civil engineering, surveying, economical design, project management and permitting services for multi-family, retail developments, office/industrial projects, and municipalities for over forty years. During its award-winning history, the company has added traffic engineering, landscape architecture and irrigation design services. With multiple certifications including LEED, Texas HUB, and SBE, Terra’s team of 30+ professionals work every day to exceed client expectations for reliability and innovation. Additional information on Terra, its team, and its projects can be found at www.terraassoc.com.

About Bowman Consulting Group Ltd.

Headquartered in Reston, Virginia, Bowman is an engineering services firm delivering innovative infrastructure solutions to customers who own, develop, and maintain the built environment. With 950 employees and more than 35 offices throughout the United Sates, Bowman provides a variety of planning, engineering, construction management, commissioning, environmental consulting, geomatics, survey, land procurement and other technical services to customers operating in a diverse set of regulated end markets. On May 11, 2021, Bowman completed its $51.7 million initial public offering and began trading on the Nasdaq under the symbol BWMN. For more information, visit www.bowman.com.

Forward-Looking Statements

This press release may contain “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. The Company cautions that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward-looking statements contained in this news release. Such factors include: (a) changes in demand from the local and state government and private clients that we serve; (b) general economic conditions, nationally and globally, and their effect on the market for our services; (c) competitive pressures and trends in our industry and our ability to successfully compete with our competitors; (d) changes in laws, regulations, or policies; and (e) the “Risk Factors” set forth in the Company’s most recent SEC filings. All forward-looking statements are based on information available to the Company on the date hereof, and the Company assumes no obligation to update such statements, except as required by law.

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Workers in Europe Are Demanding Higher Pay as Inflation Soars

PARIS — The European Central Bank’s top task is to keep inflation at bay. But as the cost of everything from gas to food has soared to record highs, the bank’s employees are joining workers across Europe in demanding something rarely seen in recent years: a hefty wage increase.

“It seems like a paradox, but the E.C.B. isn’t protecting its own staff against inflation,” said Carlos Bowles, an economist at the central bank and vice president of IPSO, an employee trade union. Workers are pressing for a raise of at least 5 percent to keep up with a historic inflationary surge set off by the end of pandemic lockdowns. The bank says it won’t budge from a planned a 1.3 percent increase.

That simply won’t offset inflation’s pain, said Mr. Bowles, whose union represents 20 percent of the bank’s employees. “Workers shouldn’t have to take a hit when prices rise so much,” he said.

Inflation, relatively quiet for nearly a decade in Europe, has suddenly flared in labor contract talks as a run-up in prices that started in spring courses through the economy and everyday life.

reached 4.90 percent, a record high for the eurozone.

Austrian metalworkers wrested a 3.6 percent pay raise for 2022. Irish employers said they expect to have to lift wages by at least 3 percent next year. Workers at Tesco supermarkets in Britain won a 5.5 percent raise after threatening to strike around Christmas. And in Germany, where the European Central Bank has its headquarters, the new government raised the minimum wage by a whopping 25 percent, to 12 euros (about $13.60) an hour.

fell for the first time in 10 years in the second quarter from the same period a year earlier, although economists say pandemic shutdowns and job furloughs make it hard to paint an accurate picture. In the decade before the pandemic, when inflation was low, wages in the euro area grew by an average of 1.9 percent a year, according to Eurostat.

The increases are likely to be debated this week at meetings of the European Central Bank and the Bank of England. E.C.B. policymakers have insisted for months that the spike in inflation is temporary, touched off by the reopening of the global economy, labor shortages in some industries and supply-chain bottlenecks that can’t last forever. Energy prices, which jumped in November a staggering 27.4 percent from a year ago, are also expected to cool.

interview in November with the German daily F.A.Z., adding that it was likely to start fading as soon as January.

In the United States, where the government on Friday reported that inflation jumped 6.8 percent in the year through November, the fastest pace in nearly 40 years, officials are not so sure. In congressional testimony last week, the Federal Reserve chair, Jerome H. Powell, stopped using the word “transitory” to describe how long high inflation would last. The Omicron variant of the coronavirus could worsen supply bottlenecks and push up inflation, he said.

In Europe, unions are also agitated after numerous companies reported bumper profits and dividends despite the pandemic. Companies listed on France’s CAC 40 stock index saw margins jump by an average of 35 percent in the first quarter of 2021, and half reported profits around 40 percent higher than the same period a year earlier.

raised in October by 2.2 percent.

Crucially, executives also agreed to return to the bargaining table in April if a continued upward climb in prices hurts employees.

At Sephora, the luxury cosmetics chain owned by LVMH Moët Hennessy Louis Vuitton, some unions are seeking an approximately 10 percent pay increase of €180 a month to make up for what they say is stagnant or low pay for employees in France, many of whom earn minimum wage or a couple hundred euros a month more.

€44.2 billion in the first nine months of 2021, up 11 percent from 2019, raised wages at Sephora by 0.5 percent this year and granted occasional work bonuses, said Jenny Urbina, a representative of the Confédération Générale du Travail, the union negotiating with the company.

Sephora has offered a €30 monthly increase for minimum wage workers, and was not replacing many people who quit, straining the remaining employees, she said.

“When we work for a wealthy group like LVMH no one should be earning so little,” said Ms. Urbina, who said she was hired at the minimum wage 18 years ago and now earns €1,819 a month before taxes. “Employees can’t live off of one-time bonuses,” she added. “We want a salary increase to make up for low pay.”

Sephora said in a statement that workers demanding higher wages were in a minority, and that “the question of the purchasing power of our employees has always been at the heart” of the company’s concerns.

At the European Central Bank, employees’ own worries about purchasing power have lingered despite the bank’s forecast that inflation will fade away.

A spokeswoman for the central bank said the 1.3 percent wage increase planned for 2022 is a calculation based on salaries paid at national central banks, and would not change.

But with inflation in Germany at 6 percent, the Frankfurt-based bank’s workers will take a big hit, Mr. Bowles said.

“It’s not in the mentality of E.C.B. staff to go on strike,” he said. “But even if you have a good salary, you don’t want to see it cut by 4 percent.”

Léontine Gallois contributed reporting from Paris.

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