November 27, 2021 Weekly Equity Market Recap. On Friday, the equity markets digested the economic threat of a new virus variant called Omicron and sold off sharply, from -2.3% for the S&P 500 to all the way down -3.7% for the Russell 2000. Omicron variant was discovered using phylogenetic sequencing techniques on November 11th in Botswana and was soon found in South Africa, Belgium, Israel and Hong Kong. The Omicron variant has 32 mutations of the spike protein alone, compared to the Delta variant which had only nine. Alarmingly, the increase in the positive testing rate in the Johannesburg region rose from 1% to 30% in one week as Omicron outcompeted the Delta variant. Disease modeling scientists estimated that Omicron has several multiples greater transmissible than the original Wuhan variant, while the Delta variant was only 70% more transmissible. For the week, the broad equity market S&P 500 finished -2.2%, while both the Dow Jones and Nasdaq -dropped -2.0% and -3.5%, respectively. Given the quick reversal of past positive stock trends, the message is to pay very close attention to the potential economic threat of this Omicron variant as more data is analyzed and distributed. That said, the stock market has historically been fairly positive after Thanksgiving. Since 1950, the S&P 500 has climbed by an average of 1.5% in December, logging a post-holiday gain more than 80% of the time.
November 19, 2021 Weekly Market. On a choppy trading week, the major U.S. equity indexes finished mixed with results: the tech-ladened Nasdaq closed up +0.4% while the S&P 500 and Dow Jones both slipped, -0.1% and 0.8%, respectively. Inflation, supply chain and unfilled jobs is still center stage concerns for investors this week. However, the fourth quarter (Q4) net profit margin estimate for S&P 500 is 11.8%, which is only slightly below the estimate of 11.9% on September 30. Investors have plowed more than $400 billion into U.S. equity ETFs over the past year, which exceeds the prior peaks in 2008-2009 and 2016-2017.
November 19, 2021 Weekly Market. On a choppy trading week, the major U.S. equity indexes finished mixed with results: the tech-ladened Nasdaq closed up +0.4% while the S&P 500 and Dow Jones both slipped, -0.1% and 0.8%, respectively. Inflation, supply chain and unfilled jobs is still center stage concerns for investors this week. However, the fourth quarter (Q4) net profit margin estimate for S&P 500 is 11.8%, which is only slightly below the estimate of 11.9% on September 30. Investors have plowed more than $400 billion into U.S. equity ETFs over the past year, which exceeds the prior peaks in 2008-2009 and 2016-2017.
Further, households’ allocation to equities now stands at 62% exposure which is just slightly off its all-time high in 2000, an ominous period which preceded the tech bust. However, supportive market breadth and company profit margins have been fundamentals that have helped sustain the rosy investment optimism. Fortunately, more than 90% of stocks within the S&P 500 have already had a 10% correction from a high at some point this year which is considered a healthy consolidation.
November 12, 2021 Weekly Market. After a series of daily equity losses on the week, major U.S. equity indexes rallied and recovered much of the lost ground: The S&P slipped -0.3% while the Dow Jones and Nasdaq dropped -0.6% and -0.7%, respectively, for the week. The equity markets continue to weigh inflationary concerns with the 6.2% year-over-year rise in inflation in October, the biggest jump since November 1990. Inflation not only eats away at the buying power of consumers but also has hit retiree bond portfolios which don’t have “growth” protection and are inversely correlated with rising rates; Fed rate hikes are a tool to constrain inflation. Further, the U.S. economy has had more than 10 million open jobs since June, with a record high quit rate of 3% in September.
November 6, 2021 Weekly Market. For the week, the S&P 500 rose +2%, the Dow Jones added +1.42%, while the Nasdaq gained the most at +3.05%. Every major index recorded a new all-time high as the bull market continues with its fifth straight week of gains. The Federal Reserve met and conveyed 'accommodative stance', reiterated interest rate benchmark of 0%-0.25%, and its intention to taper stimulus. Further, the Labor Department report showed U.S. employment increased more than expected in October. Earnings to date for the third quarter (Q3) show 81% of S&P 500 companies have beaten EPS estimates, which is tied for the 4th highest percentage since FactSet began tracking this metric in 2008.
November 12, 2021 Weekly Market. After a series of daily equity losses on the week, major U.S. equity indexes rallied and recovered much of the lost ground: The S&P slipped -0.3% while the Dow Jones and Nasdaq dropped -0.6% and -0.7%, respectively, for the week. The equity markets continue to weigh inflationary concerns with the 6.2% year-over-year rise in inflation in October, the biggest jump since November 1990. Inflation not only eats away at the buying power of consumers but also has hit retiree bond portfolios which don’t have “growth” protection and are inversely correlated with rising rates; Fed rate hikes are a tool to constrain inflation. Further, the U.S. economy has had more than 10 million open jobs since June, with a record high quit rate of 3% in September.
November 6, 2021 Weekly Market. For the week, the S&P 500 rose +2%, the Dow Jones added +1.42%, while the Nasdaq gained the most at +3.05%. Every major index recorded a new all-time high as the bull market continues with its fifth straight week of gains. The Federal Reserve met and conveyed 'accommodative stance', reiterated interest rate benchmark of 0%-0.25%, and its intention to taper stimulus. Further, the Labor Department report showed U.S. employment increased more than expected in October. Earnings to date for the third quarter (Q3) show 81% of S&P 500 companies have beaten EPS estimates, which is tied for the 4th highest percentage since FactSet began tracking this metric in 2008.