Weekly Commentary: December 27, 2021
The Week in Review: Dec. 19 - 25
Making market spirits bright
Last week, domestic markets bounced back after studies showed the new omicron variant might not be as severe or disruptive as previously feared. After sliding the previous week, markets carried the downward momentum into Monday, and the S&P 500 marked its first three-day losing streak since May. Continuing concerns around omicron and Senator Joe Manchin saying he was a “no” on the $2 trillion Build Back Better legislation contributed to the downward slide.
But it’s the season of joy and hope, after all — and some hopeful news helped markets turn course by Tuesday. Moderna released preliminary data showing its booster shot dramatically increased antibodies capable of targeting the omicron variant. Evidence also emerged regarding omicron’s severity, with reports indicating that those who get it usually experience mild upper respiratory symptoms. Additionally, the initial wave of the virus in South Africa also seems to be receding just as quickly as it spiked.
Traders seemed further reassured by President Joe Biden’s assurances mid-week that he had no plans for additional shutdowns or lockdowns in response to rising COVID-19 cases. And as we headed into the holiday, the U.S. Food and Drug Administration (FDA) granted emergency authorization to Pfizer and Merck for their coronavirus-fighting pills.
Economic data also surprised on the upside last week. Durable goods orders rose 2.5% in November, well above consensus expectations. Surveys indicated that inflation expectations and gas prices may have peaked in November, while the Bureau of Economic Analysis adjusted third-quarter gross domestic product (GDP) slightly higher.
Home for the holidays
Last week’s only less-than-stellar data was new home sales, which came in lower than expected for November. However, existing home sales rose in November and seem to be on track for their strongest year since 2006. But signs show the red-hot real estate market could cool slightly in the coming months. Economic analysts say the inventory of existing homes should increase by spring while improving supply chain issues could boost new construction sales. They also expect mortgage rates to rise to 3.7% by the end of the year, potentially reducing the number of new and refinanced loans.
Speaking of loans, last week the White House extended the pause on student loan payments another 90 days. Borrowers were scheduled to restart payments on Feb. 1, but the new start date is May 1.
Payments — as well as added interest and debt collection — have been on hold for nearly two years.
Coming this week
Interesting factoid: The New York Stock Exchange won’t be closed in observance of the New Year holiday. NYSE Rule 7.2 says the exchange will close on Friday or Monday if the holiday falls on a weekend, unless “unusual business conditions exist, such as the ending of a monthly or yearly accounting period.” Dec. 31 is the trifecta of the month-end, quarter-end and year-end accounting period, so markets will be open all five days this week.
Data will be light this week. We’ll see the Case-Shiller home price index on Tuesday, plus the pending home sales index on Wednesday. Trade in goods data will be released on Wednesday and should give us a good idea of how the holiday shopping season went for retailers.
Happy New Year!
Tom Siomades, CFA®
Chief Investment Officer
AE Wealth Management
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