Swings in the Markets in November

Key Points – Swings in the Markets in November

Omicron’s Impact on the Markets
The Latest on Inflation
Small Rate Hikes Likely in 2022
Slowing Economic Growth Rate Still in Order
3-minute read | 6 minutes to watch

There never seems to be a dull moment in the markets, and November was certainly no exception. Dean Barber shares how a new COVID-19 variant, ongoing inflation, and projected small rate hikes have accounted for some wild swings in the markets in November.

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November Brings Wild Swings in the Markets

Here we are at the beginning of December. It’s been a wild year. Let’s just recap some things that happened it November.

Family First: Dean Welcomes His First Grandchild

First, and most importantly, I became a grandfather for the very first time. My wife, Kim, and I’s oldest daughter, Lindsay, and her husband, David, brought Piper Lou into the world. She joined us, coming home from the hospital on Thanksgiving Day. That was my highlight of November.

Omicron’s Impact on Swings in the Markets and An Update on Inflation

The day after Thanksgiving, the Omicron variant of COVID-19 came out. We have seen wild swings in the markets—up and down. Federal Reserve Chairman Jerome Powell stepped back on his original thoughts of inflation being transitory. That means that inflation is probably here to stay. He’s going to start tapering the bond-buying program. That could lead to the possibility of a couple of interest rate hikes next year.

Last month, we thought we would see one rate hike next year. Now, we could see two rate hikes. I think those rate hikes will be small—both about 0.25% each.

The Current Health of the Markets

With that said, let’s look at the health of the market in general before I give an economic outlook for 2022. Here are the different indexes right now in Figure 1.

FIGURE 1 | December 1 Indexes | Chaikin Analytics

For example, in the NASDAQ 100, 28 of those stocks are bullish, 57 are neutral, and 15 are bearish. The NASDAQ 100 is still getting a very bullish rating.

We then move to neutral-plus ratings for the S&P 100, S&P 500, Russell 1000, Russell 3000, S&P 600 Small Cap, and S&P 400 Midcap. Meanwhile, the RSP, Dow Jones Industrial Average, and Russell 2000 are simply neutral. We are seeing more stocks in bearish territory in all indices.

FIGURE 2 | November Market Performances | Chaikin Analytics

If we look above at what markets did over the last month in Figure 2, everything was either flat or down a little bit except for the NASDAQ 100. The dips were mainly in the last few days once the Omicron variant emerged. We don’t know what the impact of that is going to be, but let’s take a step further back in Figure 3, Figure 4, and Figure 5 with the last three months, six months, and past year. This helps us understand the volatility with these wild swings in the markets.

FIGURE 3 | Market Performances in the Last Three Months | Chaikin Analytics

FIGURE 4 | Market Performances in the Last Six Months | Chaikin Analytics

FIGURE 5 | Year-to-Date Market Performances | Chaikin Analytics

We do have everything in a very positive territory when looking at year-to-date, but we’re seeing a little fall-off. The question becomes whether that fall-off will be different than the fall-off we saw in the summertime. Or is this something that can turn into a bear market?

Slowing Economic Growth Rate Still in Order

There are several things going on where we really don’t know what the outcome is going to be. We’ve still got the Build Back Better plan, the Fed beginning to tighten, and the new variant of COVID-19.

From an economic perspective, though, I believe we’ll still see a solid, but slowing growth rate through 2022 and even 2023. I don’t see a recession on the horizon. Typically, a recession is required to have a bear market.

I believe we’ll end the year higher than we are now in most major indexes. That’s assuming nothing comes out of left field and throws the markets for a loop.

We’ve seen the 10-year treasury kind of vacillate between about 1.4% and 1.7%. It’s still staying in a tight range. I’ll stick by my prediction from last month that we end 2022 with the 10-year treasury still below 2%. Even if we get a couple of rate hikes, I think that 10-year treasury is going to remain low.

We did see some great news with a lot of jobs being added and the number of home sales in November. I think things are going very well from an economic perspective. Unemployment is back down, but we need to get the participation rate back up—meaning the people who aren’t looking for jobs. Getting the supply chain issues resolved should also make a big difference for the growth of the economy in the next two years.

Happy Holidays!

With that, I just want to wish you all a very happy holiday season. I hope you get to spend good time with your friends and family and enjoy it. I’ll be speaking with you again at the beginning of the new year. Thanks for joining me.

If you aren’t a client of Modern Wealth Management, you are still more than welcome to start a conversation with us. You can schedule a complimentary consultation below or call us at (913) 393-1000. We’re happy to help you.

Dean Barber Founder & CEO

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