In this stock market update, Steve Wolff (Managing Partner at WWM Financial) discusses what has occurred in December. He discusses Jerome Powell and the Fed’s stance on interest rates, Covid and its variants and how the market has reacted. He also discusses small cap stocks to large cap stocks, the unemployment rate, and the US economy.
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Click on the image above to watch December’s Stock Market Update.
Stock Market Update 12/3/2021
How has the market reacted because of Omicron? Is the stock market still goin up? Steve Wolff, Managing Partner at WWM Financial dives into what has occurred in November and where we are currently with the stock market.
Steve discusses Jerome Powell being re-elected, the Omicron variant, inflation and Moderna’s take on vaccines.
This is Steve Wolf with the November 2021 monthly review. Before we talk about what happened in November, let’s get some legal business out of the way. What I’m about to say is strictly for informational purposes only, and it’s not meant to be a recommendation. Before you buy or sell anything related to anything I’m saying about the markets or individual securities consult your financial advisor to make sure that it is appropriate for your personal situation.
All right, what happened in November 2021. As New York Yankees hall of Famer Yogi Barra once said, it’s deja vu all over again. A new variant to the COVID crisis is discovered and the stock market takes a dive. Where have we seen this before? While I was still recovering from my tryptophan coma from Thanksgiving when on Friday an South African official said there was a new strain of COVID 19 called Omicron. That was discovered that was enough to ruin the shorten Friday trading session as all the stock indices were down sharply for the day on that news.
Now on the last day of November, which was Tuesday, it looked like the markets were going to recover as the futures were showing a positive stock market. Then an article came out in the Financial Times that the CEO of Moderna, which is one of the companies that has been manufacturing the COVID vaccine and certainly is at the epicenter of all this, he basically said that due to the amount of spike protein mutations to the COVID 19 virus, and there’s currently about 32 of these, there is no way the current vaccines would work extremely effectively against the Omicron variant. Well, that was the match that lit the downward spiral in futures. And that worked its way sharply into a lower open on Tuesday.
But then the market started to recover and it looked like it was going to shake off the news, of course not so fast. Then Federal Reserve Chairman Jerome Powell poured gasoline on the fire somewhere around 7:30 AM, California time at the time I normally like to enjoy my breakfast. And he said in a Senate hearing that he was basically taking an about face in the policies he had championed for these many months. In a nutshell, here’s what he said. One, he’s considering ending the taper of asset purchases sooner than originally planned. Two, it’s time to stop using transitory when talking about inflation, which I kind of laugh at because we’ve been talking about that for two or three months now. He said that inflation is spreading, no big news there. The risk of higher and persistent inflation has increased, but he also said the economy is currently strong, but the Fed will use all of its tools to stop inflation. Well, this really spooked the bond market as treasury yield soared and stocks took a dive. That helped to make November a mixed, but mostly down month.
So let’s look at the scoreboard for November of 2021, the S&P was down about 1% for the month. The Dow Jones Industrial Average was down about 3.7% for the month. And the NASDAQ was actually up ironically, 2% for the month.
So what does all this mean for the future, at least for the near future? First, let’s talk about Omicron. Does anyone know how to pronounce this? It’s Omicron, Omicron, we’ll get it. It’s so new no one knows how to pronounce it. So let’s talk about Omicron. I’m certainly no doctor, and I’m not an epidemiologist, but from what I’ve read so far, the Omicron variant is highly contagious, but not nearly as deadly as some of the other variants that have been around. Hopefully it will mean the government will not lock down the economy again, but if the economy does slow because of the virus, this would put a little downward pressure on rising interest rates and inflation. So we’ll have to see what happens there.
Now, we haven’t talked too much about this supply chain bottleneck that’s still going on out there and it’s still a problem. But in time, as I’ve said before, I think this will dissipate and it will ease some of the inflationary pressures. On the other hand, food and gas prices have been up and gasoline and other fuel prices just continue to rise. And at the moment, I really don’t see a reason for it to fall, not at this point. And that’s going to keep some pressure on inflation. Labor is still an issue as companies cannot find enough workers for all the jobs that are out there right now. Now, many of the companies have increased the amount that they’re paying to their laborers. And in some of the cases they’re giving monetary incentives for people to come to work.
In any case, these rising costs will eventually have to be passed on to the consumer. So Powell does have a lot to worry about, and I think he’s going to have to walk a fine line when it comes to the velocity with which rates are increased. Now in the very near future, many of the growth stocks that have had an extended valuation, they’re giving back some of those gains. And I think you saw it yesterday and again today, December 1st as we’re recording this, it happened again today. And as you know, I’ve been saying that this might happen over the last couple of months in the commentaries that I’ve had. So I expected some sort of a short term downturn. So to me, this is not really a big surprise and it shouldn’t be to you. What has changed, however, is the commentary by the Federal Reserve. So growth stocks might be in the doghouse for a while, but we’ll just have to wait and see.
So that’s a wrap for the month of November. We’ll see you back here at the beginning of January when we start a new year and we’ll discuss what happened in the month of December, have a happy new year everyone.
*WWM Financial is an SEC Registered Investment Advisor
Click on the image above to watch November's Stock Market Update.
Stock Market Update 11/5/2021
What is going on with the stock market? Is the stock market still in-tact?
Steve Wolff, Managing Partner at WWM Financial, dives into what has occurred in October and where we are currently with the stock market.
Steve discusses company earnings, large cap stocks vs. small cap stocks, inflation, supply chain issues and what this holiday season could potentially look like.
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Click on the video above to watch August's Market Update.
Stock Market Update 8/4/2021
In this informative yet brief market update, Steve Wolff discusses amazing stock earnings, the Delta Variant and mortgage rates.
Transcript below:
This is Steve Wolff, and we’re going to talk a little bit about what happened in July of 2021, and we’ll do our Monthly Market Update. So this was the month that the COVID variant seems to have made its reappearance. There’s a lot of talk about, should you wear a mask? Should you not wear a mask? People getting vaccinated, et cetera, and that’s had an effect on the market. Earlier in the month, the marketplace actually had one day that was really bad, but then it seemed to come back. I’m not convinced yet that the COVID virus coming back at all is going to really affect the stock market, but it has affected it a little bit so far.
What happened this month? Well, bond yields actually went down a little again, which means mortgage rates are once again on the table. If you haven’t refinanced your mortgage, you might think about doing that right now. I’m seeing rates that you can get under 3%, and that’s pretty cheap. People today think when rates go to 4% that that’s expensive, or 3.5%. I can only tell you that my first house way back when, I had a 10 and three quarters percent mortgage rate. I’m sure some of the people who are watching here, who are older, will remember that; so when we’re talking about 3%, in my opinion, that’s really low.
What else happened? Stock earnings. Stock earnings this month, they’ve really been great. I mean, they actually outperformed high expectations. Now, some of the stocks have pulled back a little bit because I think even with high expectations, you had stocks that ran a little bit maybe ahead of themselves. But that’s okay. They reset a little bit. We talked about this before. I still think that we’re still in the midst of a bull market. As you can see my little friend, Mr. Bull over here, who’s still hanging on. I think that we’re going to be hanging on here for a little bit longer.
Interestingly though, when you’re looking at the stock market, you really should differentiate between the “market” and really what it represents. For instance, what I’m talking about here is that in the S&P 500, the top five stocks make up about 22% of the portfolio, and the top 10 stocks in a 500 stock portfolio represent somewhere around 30% of the portfolio. So really, when you’re talking about the market, you’re really talking about maybe 10, 15, 20 stocks having a big mark on what’s going to happen as far as the markets, and what they’re going to do. So, I would actually look at individual stocks.
When I look at big tech and big online retailers, their earnings were outstanding. They really were. A matter of fact, it’s hard to believe. Usually, you say, in the ocean, the battleship, it takes a long time to turn it around. A rowboat, you can turn real fast. Yet, these huge behemoths of companies have just been… terrific. Until that changes, I still think that the bull market is intact. I don’t see any reason to change where we’ve been for the last couple of months. That’s where we’re at. Mr. Bull, you’re still hanging on and we love it. We’ll talk to you next month. Thanks.
Steve Wolff is a Managing Partner at WWM Financial in Carlsbad California.
Steve can be reached at 760-692-5190.
Disclaimer
The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.
WWM Financial is an SEC Registered Investment Advisor. Advisory services are only offered to clients or prospective clients where WWM Financial and its representatives are properly licensed or exempt from licensure. No advice may be rendered by WWM Financial unless a client service agreement is in place.
In this episode: Steve Wolff discusses how excided he is about the investing opportunities in this techno-digital revolution.
Full transcription below:
Steve Wolff:
Hello everyone, this is Steve Wolff with another edition of Steve’s Stock Stories. I’m here with my
cohort, producer and friend Joscelin Magaña.
Joscelin Magaña:
How’s it going everybody?
Steve Wolff:
This is one of my favorite topics. I am so happy to be alive at this point in time, because we are going
through a technological digital revolution. This must be what it felt like to be in the industrial revolution,
when you went from the horse and buggy to cars. Of course, eventually putting men on the moon. But I
mean, all the things that happened in that time are happening now only they’re happening digitally.
Joscelin Magaña:
I feel the same first feeling when I saw the world change in a dramatic way where I was so excited. Two things that I remember surfacing, the mobile phone and the internet.
Steve Wolff:
Oh, yeah.
Joscelin Magaña:
Remember when the movie The Saint came out? That little phone was amazing. He had video on there, he got text messages. I thought, “Oh my gosh, if that could ever possibly happen.” Then we have way better phones than that now, you just throw that little toy away. Right? The other big thing that I saw was the internet. When I was in college, we were just using email at the time. There were these things called websites. I remember thinking, “Wow, we’re going to be able to buy stuff on the internet
someday.” I remember telling somebody, “Hey, this is going to be an amazing space because we’re just
going to be buying stuff on the internet.” And they’re like, “Who’s going to buy stuff on the internet?
You just go to the store. Why the hell are you going to-?” Okay. One technological advanced before this, which kind of wasn’t, but everybody thought was crazy, was when everybody started buying bottled water; but that’s a whole other subject.
Steve Wolff:
Well you talk about phones. I remember watching the movie Wall Street with Michael Douglas and he
had a mobile phone, but it was probably, I don’t know, 12 inches.
Joscelin Magaña:
Oh, yeah. They were big.
Steve Wolff:
They were huge.
Joscelin Magaña:
They were big, like a shoe box.
Steve Wolff:
Right, they were big. You could make a phone call on there today, my goodness, you could do just about everything. You can turn on your car, you can-
Joscelin Magaña:
You can turn on your sprinklers in your house, you can see your front door. It’s amazing.
Steve Wolff:
What they have in that little phone is way more powerful than what IBM first came up with when they had that first computer that took up, I don’t know, three rooms or something. With vacuum tubes and whatever, it’s just incredible.
Joscelin Magaña:
I guess where I’m going with this is that I’m as excited now as I was when mobile phones were becoming more accessible and the whole mobile phone revolution and the internet. I remember my first job we didn’t even have computers on our desks…
