December 2021
Market Update

In my house we are merrily taking turns picking the next holiday movie with White Christmas and The Grinch usually getting the most votes!  Tree is up, shopping done and baking is next.  Ready to relax and enjoy fellowship with family and friends and the end of another year.

Stock markets appeared to enter the holiday season in an equally festive mood, with the S&P and NASDAQ hitting new all-time highs right before Thanksgiving as our “Santa Claus rally” arrived early. 

However, the mood turned decidedly less enthusiastic with the announcement of a new troubling variant of the COVID virus.  Omicron has now been detected in three states.  While there is a heightened level of concern, everyone understands we are very early in the cycle here with this mutation.  Remember the mu mutation?  No?  It, too, caused some consternation and then quickly disappeared from the headlines.  Time will tell if this is more transmissible, more lethal, or has now mutated to a level we can tolerate and live with.  It is clear that no one is anxious to affect an economic hard stop once again.

We’re still suffering the supply chain shocks from that move.  Which likely explains why neither  Black Friday nor Cyber Monday delivered the record sales businesses were hoping for.  Stores were packed, shelves were not, but the debate is whether shelves were emptier because consumers bought more … or product is stuck in Long Beach Harbor …. Or stores simply didn’t have enough people to restock shelves!  See our Graphic of the Month for a view of what’s going on in the labor market these days: CLICK HERE

The government has added a bit of coal to the stockings recently as well.  The Federal Reserve seems to have become more concerned about inflation – now ticking above 6% - and have signaled a more aggressive taper of their bond purchases.  And in a place where words carry great import, Chairman Powell has removed the term ‘accommodative’ from the Federal Reserve’s policy, signaling to the markets that they are preparing to take away the punch bowl that has fueled this stock market rally for the past 18 months.  Cue volatility!

And yet … even the Grinch had a change of heart as he realized he just couldn’t keep Christmas from coming!  Every day of negative news and ensuing volatility has quickly been followed by renewed optimism and positive markets.  Our explanation is simply that the economy is on the road to recovery and in spite of these air pockets, the sheer amount of money awash in our economy, coupled with rock bottom interest rates, will continue to fuel investment in the stock markets for the near term.

In your portfolios here, the volatility spike did trigger a few of our models to take “risk off” and raise some cash, so you will see that reflected in your statements this month.  Bonds also stumbled a bit with an exit of preferred stocks in one of the Total Return portfolios.   Whether more risk off is needed remains to be seen and we will be watching the virus, the Federal government and the retail sales numbers for more clues on what comes next.

If you would like to hear more about the economy and markets, please join us for our Q4 Zoominar next Wednesday, December 8th at noon!  If you have not already done so, you may register for your link to the presentation here: CLICK HERE

This is the last commentary of 2021, so let us take this time to wish everyone a very happy, healthy and safe holiday season!

If you have questions, please contact us.

FINANCIAL PLANNING
COLLEGE AND TAX PLANNING
401(K) ALLOCATION
GRAPHIC OF THE MONTH

To download the December 2021 Newsletter: CLICK HERE