Santa Rally & Make Merry This Season

Santa Rally

Santa Rally or not, we’ve been through a lot in 2021 – more quarantining, hybrid work environments, ups and downs in the economy, and political uncertainty. Chances are, you’ve been so busy adjusting to all the changes while also trying to hold onto family ties and traditions that you’ve had little time to relax and enjoy this special time of year. 

Well, now is your time. Take it. One of the most valuable things you can do in a busy season is to find moments of “me time.” Prioritizing wellness, including in your financial life, and taking time to set your strategy allows you to more generously show up for others and extend goodwill. I can help show you how. So, go ahead, start the timer. Carve out a few minutes for yourself today.

Last Week

Equities moved higher after risks that the Omicron COVID variant would slow down economic activity wanned. The S&P 500 and Nasdaq indexes posted gains over 3%, and Dow was up 4.05% for the week, as volatility fell. The S&P hit a new all-time high on Friday. Every S&P 500 sector was positive. Crude oil jumped nearly 9% to climb back above $70 per barrel. Consumer prices rose 6.8% Year-over-Year and 0.8% Month-over-Month in November. This was the fastest annual pace since 1982, and in-line with expectations. Consumer sentiment rose to 70.4 in December, still lower than a year ago due to higher household inflation expectations.

On the labor front, resignations declined by 4.7% in October. Openings moved back up to 11.03M, up 4.1% Month-over-Month and just below the all-time high. Weekly jobless claims sank to a multi-decade low of 184K. Paychecks and hours worked grew in Q3, but productivity slumped 5.2%, worse than initial reports.

Week Ahead – Santa Rally or Coal to Wrap up 2021

The last full week before the holiday season begins. Will the Santa Rally continue, or finish the year with a lump of coal? This week features four central bank meetings and a host of economic releases. On Wednesday, the FOMC may reveal an accelerated tapering timeline. Markets are already pricing in better than 50% odds of a rate hike by May 2022. More inflation figures are reported with U.S. PPI on Tuesday, followed by CPI from the UK and Canada the next day.

This week also brings the first look at manufacturing and services PMIs for December in the U.S. and Eurozone. China’s monthly data dump will include annual figures for retail sales and industrial production. Other events of note include U.S. retail sales, regional manufacturing updates from New York and Philadelphia, and Australia’s employment account. The week closes with UK retail sales and Germany’s business sentiment information.

Year-to-date index performance; Dow up 17.53%, S&P up 25.45%, and Nasdaq up 21.28% through the close on Friday.

Happy holidays, see you next year!

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Omicron Variant and the Impact on Markets

omicron variant

A volatile week sent U.S. equity indexes lower after a disappointing jobs report, dampening Fed comments, and negative Omicron variant news. December kicked off with some fireworks, and the rest of the month looks ready for more volatility as opposed to the seasonal Santa rally investors have come to expect. All three major indexes finished lower for the week; the Dow down 0.76%, S&P down 1.18%, and Nasdaq down 2.6%.

Last Week – Omicron Variant

The S&P 500 recorded its second consecutive weekly loss. The index finished the month of November down 0.83% after rising to record highs early in the month. Equity markets dropped on the announcement of the omicron variant. The variant originated in South Africa but has made its way to the U.S. The VIX volatility index spiked over 100% from an October low to the highest level seen since January of this year.

Fed chair Powell’s Senate testimony surprised markets by implying a potentially quicker path for tapering and eventually rate hikes. Even in the face of the omicron variant. Adding it’s probably time to stop using the word “transitory” to explain the recent surge in inflation. Powell also warned the omicron variant could slow the labor market’s recovery and increase supply chain disruption. The market is currently anticipating one rate hike by July 2022.

Job reports were mixed last week. U.S. private sector job growth was robust in November, with the ADP report coming in above estimates at 534K. On the other hand, the non-farm payroll report disappointed with only a 210K rise in November payrolls. This figure was less than half the estimate, despite the unemployment rate falling more than expected to 4.2%. The 4.2% mark is the lowest since February 2020. The U.S. economy has now recovered 83% of the jobs lost in March and April of 2020.

In other economic news, U.S. ISM Manufacturing PMI ticked up to 61.1 in November. The services PMI recorded another all-time high of 69.1 as strong demand was boosted by supply chain improvements. According to the Conference Board’s report, consumer confidence fell to a 9-month low on rising prices and pandemic concerns. Despite rising mortgage rates, pending home sales jumped 7.5% in October as buyers returned.

Week Ahead

This week the main U.S. events include Treasury auctions, which did not go well the last time around, and the JOLTS job openings report on Wednesday. CPI report comes out on Friday. The market is anticipating a blowout November CPI inflation rate to be announced in the week ahead. The median estimate of 6.7% growth would be the highest since 1982. On the international calendar, China headlines with inflation data and trade balance numbers. US investors will also continue to monitor exposure to China as pressure from Chinese regulators led Didi Global Inc. to make the decision to delist from the NYSE in favor of a Hong Kong listing. Year-to-date index performance; Dow up 12.98%, S&P up 20.83%, and Nasdaq up 17.05% through the close on Friday.

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

New Covid Variant Impact

new covid variant

U.S. equities tumbled in a shortened Friday session over fears of a new COVID-19 variant. Stock indexes were little changed heading into the U.S. Thanksgiving holiday, but the late-week meltdown sent stocks lower. Last week was a reminder that the economic recovery path is still dependent on progress against the pandemic and how quickly conditions can change. All 3 major indices finished lower on the week.

Last Week – New Covid Variant

The new covid variant strain is thought to be the most mutated variant yet. This is creating concern over the effectiveness of current vaccines and the durability of global economic recovery. Prior to Friday’s decline, the S&P 500 index had gained over 9% for the quarter and over 26% YTD. For the week ending Friday, the Nasdaq was down 3.52%, the S&P 500 down 2.18%, and Dow finished down 1.95%.

The volatility index soared 10 points to 28.50. Oil prices initially rallied after the U.S and five other countries coordinated to release reserves but ended up down 13% on the week. The average price of gasoline in the U.S. is $3.70 per gallon, approximately $1.25 higher than one year ago. However, oil prices did not decrease on the news, as markets viewed the amount too small to make an impact on prices at the pump.

U.S. economic data was largely positive, however, the new covid variant renewed pandemic risks. Jobless claims, which totaled a stunning 199K, was the lowest level since 1969. President Biden announced he would nominate Fed chair Powell to a second term. Consumer prices have yet to ease, as the Y/Y Core PCE Index rose 4.1%, the highest annual level since 1990. Private sector growth remained robust in November, with U.S. manufacturing PMI increasing to 59.1, but services slipped to 57.0. The second estimate of Q3 GDP ticked up to 2.1% from 2.0%, with a massive upward revision to the increase in wages and salaries.

New home sales rose 0.4% in October, and existing home sales climbed 0.8%. Realtors are projecting full-year sales of over 6 million, which would be the highest total since 2006. Finally, global PMIs echoed U.S. conditions, with strong private sector growth being tempered by inflationary pressures and supply bottlenecks.

Week Ahead

Last week was a reminder that the economic recovery path is largely dependent on progress against the pandemic and how quickly conditions can change. Central bank leaders will likely have to continue exercising policy flexibility. Some economists just published expectations of a potential 8% surge in Q4 U.S. GDP, but it remains to be seen how this new covid variant threat may undermine that outlook. After last week’s strong unemployment claims number, investors will look for additional labor market clarity from Wednesday’s ADP and Friday’s NFP reports. This week also brings U.S. ISM manufacturing and services PMIs, along with the regional report from Chicago.

Year-to-date index performance; Dow up 14.03%, S&P up 22.33%, and Nasdaq up 20.20% through the close on Friday.

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

New Infrastructure Plan and Rising Inflation Concerns

rising inflation

Rising inflation led Interest rates to rise along with commodities and cryptocurrencies. Hot inflation data sent interest rates higher and U.S. equities moderately lower. This week the focus shifts to how inflation and supply chain issues are affecting consumer spending and industrial production. All indexes finished slightly lower for the week ending Friday. The Dow down 0.56%, S&P down 0.27%, and Nasdaq down 0.68%.

Last Week – Rising Inflation

Treasury yields rose significantly over the course of the week with the infrastructure plan and rising inflation concerns. Federal Reserve Chairman Jerome Powell had said the previous week that the Fed would be patient about raising interest rates. However, those concerns were realized further on Wednesday as inflation (CPI) surged 0.9% Month-over-Month and 6.2% Year-over-Year. Estimates were 0.6% and 5.9%, respectively. The largest YoY jump since 1990.

Investors are not sure the Fed will be able to hold off a rate hike for as long. The chance of a rate hike by next June rose from 55% to 77% in one day, and yields soared. Yields rose materially again on Friday with the UM Consumer-Sentiment Index coming in at 66.8, the lowest since 2011. Americans’ expected inflation rate increased to 4.9% for the next year. Rising wages is also pressuring prices. According to the JOLTS report, 4.4 million Americans quit jobs in September.

After five straight weeks of gains, the S&P 500 Index posted a down week. The index has been positive all but two months in 2021, January and September. Six of 11 S&P 500 sectors fell last week. Treasury yields lifted across the curve, especially at the front end as traders continued to pull rate hike expectations forward. U.S. Core inflation ran at a 4.6% pace, pointing to concerns that inflation may be more persistent than policymakers think. Wholesale prices, as measured by the PPI, swelled 8.6% YoY.

Equities recovered some of their losses later in the week with information technology and materials rising the most. U.S. initial jobless claims of 267K were above the 260K expected, but lower than the previous week’s 269K. Claims have continued to decline since peaking in early April and are approaching pre-pandemic levels. Electric truck maker Rivian Automotive Inc., which IPO’d at $78 per share last week, jumped 66.60% through Friday. The company is now worth more than both Ford Motor Company and General Motors Company. Making it the largest US company without revenue. Johnson & Johnson announced the spin-off of its consumer health business, creating two separate companies.

Week Ahead

This week the focus shifts to how pandemic-related disruptions are affecting consumer spending and industrial production. In the U.S., the economic calendar kicks off with the Empire State Manufacturing Index today. October retail sales and industrial production numbers on Tuesday. Housing starts drop Wednesday, with the Philly Fed Manufacturing Index on Thursday. There are a number of speeches from FOMC members throughout the week. It is becoming clear that investors are in disagreement regarding both fiscal and monetary policy. The “transitory” argument is wearing thin. Across the pond, the Bank of England surprised markets last week by holding rates steady. UK CPI is expected to show further acceleration.

Earnings announcements expected this week include NVIDIA Corp, Walmart Inc., The Home Depot Inc., Cisco Systems Inc., Lowe’s Companies Inc., and more. Year-to-date index performance; Dow up 17.95%, S&P up 24.67%, and Nasdaq up 23.06% through the close on Friday.

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Major Indexes Continue Higher

market indexes

Major indexes closed at all-time highs last week. U.S. equities reached new record highs after strong jobs data and the Federal Reserve’s expected tapering decision. Last week, the Dow finished up 1.43%, S&P 2.03%, and Nasdaq 3.08%.

Last Week – Major Indexes Reach New Highs

The S&P 500 Index returned 2.03% last week after closing Friday at all-time highs. Equities rallied on positive economic data and strong corporate earnings. Last week earnings season reached full swing after 183 names in the S&P 500 announced quarterly results. Every S&P 500 sector except healthcare and financials posted gains. For the second straight week, the S&P was led by the consumer discretionary sector. Basic materials and technology also advanced more than 3%.

The U.S. central bank would like to see further improvements in the labor market before raising interest rates. Mainly, in the participation rate, which is still below pre-Covid levels. The Federal Reserve announced they will start tapering or reducing their asset purchases per month. When questioned about interest rates, Federal Reserve Chairman Jerome Powell stated rate hikes could happened in the back half of next year, but the Federal Reserve will remain “data dependent” in their decisions. Regarding inflation, Powell and the Federal Reserve’s certainty in inflation being transitory continues to decrease as higher prices continue. Last week wrapped up with Friday’s stronger than expected jobs report. Friday’s Non-Farm Payroll report revealed 531K new jobs added in October, with the unemployment rate falling to 4.6%.

Wages have also risen 4.9% Year-over-Year. Earlier in the week the ADP account showed private payrolls rising 571K for October, and weekly unemployment claims dropped to 269K. In other economic news, the U.S. ISM Services PMI jumped to a record 66.7 in October, while manufacturing activity slowed to 60.8 from 61.1 on stretched supply chains. U.S. Q3 productivity growth fell 5%, the biggest quarterly drop since 1981, as unit labor costs leapt 8.3%. Overseas, the Bank of England surprised by holding rates steady on labor market concerns. Crude oil fell 2% even though OPEC decided not to raise production in the face of mounting pressure from the Biden administration. China’s October PMI slipped into contraction, and Chinese tech stocks remained under pressure from regulators.

This Week

Even with a robust jobs market, high inflation, and expectations of rate increases as soon as the second half of 2022, 10-year Treasury yields fell 10 basis points last week. The Fed did add a note of caution in its statement, particularly on inflation, and investors have been well prepared for the central bank’s bond buying reduction. Ultimately it reflects an uncertain environment which may continue to drive rate volatility in the near term.

The U.S. economic calendar is light but contains important updates, with PPI on Tuesday and CPI on Wednesday. China releases their inflation data late Tuesday, with producer prices expected to advance even further from last month’s 26-year highs. Other notable events include Australia’s employment numbers, preliminary Q3 GDP from the UK, and Eurozone sentiment and industrial production figures. The week finishes up with U.S. Jolts job openings and a preliminary consumer sentiment reading for November.

This week earnings season is winding down as 20 names in the S&P 500 are expected to report. Notable names expected to report include Berkshire Hathaway Inc., The Walt Disney Co., PayPal Inc., Johnson Controls Holdings. Year-to-date index performance; Dow up 18.7%, S&P up 25.06%, and Nasdaq up 23.9% through the close on Friday.

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

How High Did Earnings Lift Indexes

earnings lift

The S&P 500 eclipsed 4600 for the first time thanks to the earnings lift. The S&P 500, Nasdaq Composite, and Dow Industrials indexes all reached record highs during the week. November kicks off with a busy and important week of data. Last week all indexes finished up. The Dow up 0.4%, S&P 1.35%, and Nasdaq 2.72%.

Last Week

U.S. equities drifted higher in the face of interest rate volatility and economic growth concerns. The S&P 500, Nasdaq Composite, and Dow Industrials indexes all reached record highs during the week. The Nasdaq managed to outperform despite disappointing earnings from Apple and Amazon. The U.S. yield curve experienced major flattening, as rate hike expectations are getting pulled forward due to high inflation. U.S. GDP grew at a 2% rate in Q3, below expectations of 2.8%. This puts additional pressure on longer-term rates as growth expectations revise lower. Consumer spending increased by only 1.6% after a 12% rise in Q2. Consumer confidence rebounded to 113.9 in October following three straight declines. The improvement was boosted by rising wages and a strong labor market. Jobless claims fell to another pandemic-era low of 281K.

The economy’s sore spot continues to be supply chain shortages, with durable goods orders dropping 0.4% in September after four straight monthly gains. New home sales surged to a 6-month high in September, but higher house prices and mortgage rates may dampen future demand. Pending home sales dropped unexpectedly. Interest rate movements were largely influenced by international developments, as the Bank of Canada struck a hawkish tone mid-week before GDP data showed likely Q3 underperformance. In Europe, ECB watchers expect a formal tapering announcement in December, as Eurozone inflation hit 4.1% in October on surging energy costs. Finally, German GDP rose 1.8% in Q3, missing expectations of 2.1% growth, and business sentiment worsened again in October on supply bottlenecks.

Earnings Review – Earnings Lift

Earnings season is in full swing with 279 of the companies in the S&P 500 having reported. 82% have beaten earnings expectations and 67% have beaten revenue expectations. The strongest results have come from Financials and Energy while Industrials have lagged. Supply chain issues have been a common
theme among companies reporting in several sectors. Mentions of “supply chain” in quarterly earnings calls were up 58% during the 2Q 2021 earnings season versus 4Q 2020. The current season is on track to be the highest in the 21st century. The largest companies in the S&P 500 reported last week. Tesla, Microsoft, and Alphabet all had stellar results providing an earnings lift. Amazon, Apple, and Facebook struggled in the prior quarter. Mark Zuckerberg doubled down on efforts to promote the metaverse. He also announced that Facebook, Inc. is changing its name to Meta Platforms, Inc., in December.

Week Ahead

November kicks off with a busy and important week of data. The FOMC meets mid-week, where the stage appears to be set for a long-anticipated tapering announcement. There is much to weigh, with a robust economy being checked by supply constraints. Inflation is exceeding its target by a wide margin. The improving but tight labor market that has yet to reach full employment. There are additional central bank policy updates from Australia and the UK on the calendar. Speaking of jobs, NFP lands Friday, preceded by the ADP report two days prior. Crude oil prices have stabilized the past few weeks, but remain near 7-year highs. Other events of note include employment numbers and PMI from Canada, and Eurozone retail sales and PMIs.

This week will include earnings results from oil stocks BP and Marathon Petroleum. Also reporting are video game makers Activision Blizzard, Electronic Arts, and Take-Two Interactive. News from the November Fed meeting is out on Wednesday. Year-to-date index performance; Dow up 17.03%, S&P up 22.61%, and Nasdaq up 20.25% through the close on Friday.

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.