Unpacking Recent Stock Market Data
Many factors are at play as we look to analyze recent stock market data. For example, in November, the Coronavirus Omicron variant caused a sell-off into month-end as investors were nervous about the travel restrictions and potential for additional lockdowns. As a result, the Dow Jones dropped 3.73%, the S&P 500 dropped 0.83%, and the Russell 2000 dropped 4.28% in November. However, we have good news to share because our portfolios outperformed the indexes because of our trading and sector selection. As a result, we sustained minimal losses, and as of this writing, we have already made money back today. Would you please review your statements and call us if you have any questions or discuss our strategy further? Since making the changes to our research process on April 1st this year, we’ve seen good numbers overall.
Should The Market Be Scared of Omicron?
Dr. Albert Bourla, the CEO and Chairman of Pfizer, went on Bloomberg News on November 30th, 2021. He said that it’s doubtful that the Pfizer vaccine will be ineffective against the Omicron variant. He also said that if he’s wrong, Omicron does post a threat, but Pfizer is prepared to offer an Omicron booster within 100 days. In addition, the S&P has notched a positive return in December 74% of the time since 1928, more than in any other month. October tends to be positive (which it was), while November until April is the seasonally most crucial period for the stock market each year. We’re optimistic that recent market performance is a bump in the road, but brighter days are ahead.
Longer-Term – We Are Optimistic
At this time, we are viewing the data on the recent stock market drop as a buying opportunity as we are optimistic about the holiday shopping season.
Here is an updated list of our reasons to be optimistic, despite short term volatility:
- For the first time since 2017, retailers are opening more brick and mortar stores than closing. This is a good sign for the commercial real estate market.
- President Biden and a bipartisan group of lawmakers approved the $1 Trillion Infrastructure Investment and Jobs Act. This law aims to remove lead water pipes, improve high-speed internet access, build better roads and bridges, upgrade airports, rail, and public transit, as well as improve our power infrastructure. All of this spending should help the materials and construction industries.
- While there is a lot of concern in the medical community about the Delta variant, we have received some good news recently. Drugmaker Pfizer announced that their experimental Covid-19 pill reduced hospitalizations and deaths by 89% in people newly infected with the Coronavirus. They plan to request approval from the US and world health officials to approve its use. All Covid-19 therapies currently available require an IV or injection, so people could potentially treat Covid-19 at home moving forward with a pill.
- Corporate profits are calculated year over year. In the last three months, corporations reported their earnings increases for 2021 versus the Covid ravaged 2020 numbers. At one point, the year-over-year growth in earnings was 105%! Q3 numbers were good, and we are expecting Q4 to be good as well.
- The Federal Reserve has been printing money and buying investments with it, commonly called Quantitative Easing. This is very accommodative to investors and is one of the reasons the market rebounded last year after Covid first hit. However, the Federal Reserve Chairman Jerome Power said on November 30th that they are considering slowing down the money printing earlier than expected, and that’s part of the reason the market dropped into month-end, but this could be a positive because it has the potential to help slow inflation.
- Demographics will continue to be a tailwind for the next 15-20 years, the same way the stock market roared up in the 1980s and 1990s. Generation X is firmly in its peak spending years, and the Millennial generation (which is larger than the baby boomer generation) is entering its peak spending years. When we study this data over hundreds of years, we find that a country with a significant portion of its population in peak spending years is very good for the economy and stock markets. As a result, we believe this tailwind will aid the stock market in 2021 and years to come.
Have More Questions?
Because of these optimistic points, we hold stock positions in our portfolio. If you’d like to discuss how your portfolio is positioned from a risk standpoint, please reach out to us right away. Likewise, please contact us right away if you’ve had any changes to your income, job status, marital status, 401K options, address, or any other financial changes. We would love to meet with you and review your investments. Please contact our office at (586) 226-2100 to schedule a review meeting at your earliest convenience. We’ll continue to monitor your investments and do everything in our power to protect and grow your accounts.
If you found our article helpful, consider reading our recent posts on the Infrastructure Bill, Budgeting, and Social Security.
Sincerely,
Ken Wink
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