Monthly Market Recap: December 1, 2021

November Market Recap

December 1, 2021

November didn’t end nearly as well as it began.

What started as another benign month with stocks drifting gently upward the first three weeks took a sudden turn for the worse. With Thanksgiving dinner still digesting and Black Friday bargain hunting in full force, stock prices sank significantly lower on November 26.

The Dow lost 905 points that day, due in large part to news about the latest COVID-19 variant – Omicron – and growing concern about how another wave of illnesses might slow the global economic recovery. If nothing else, it was a reality check that this pandemic is not yet over.

For the stock market, November was essentially three baby steps forward followed by a faceplant. Only two of the 11 sectors in the S&P 500 finished positive. Technology (+4.2%) seemed to benefit for the same reasons it did in 2020 (think: “Stay at home stocks” will weather pandemic problems better than most). Consumer Discretionary (+1.9%) also delivered monthly gains. Energy (-5.8%), Financials (-5.8%), and Communication Services (-5.2%) were dealt the biggest losses.

Index November 2021 YTD 2021
Dow -3.73% +12.67%
S&P 500 -0.83% +21.59%
NASDAQ +0.25% +20.56%

The relative outperformance of Technology companies allowed the NASDAQ to finish slightly positive last month and helped the S&P 500 lose less than 1%. Those numbers hide a more violent selloff in other areas of the market. All of the Dow’s 3.7% loss came in the final three trading days of November. Energy stocks lost 5.7% in the same 3-day period. Financials dropped 5.3%. Small-cap stocks (measured by the Russell 2000) fell 5.7%.

The discovery of Omicron in South Africa came after Austria initiated a nationwide lockdown earlier in November. Germany said it would consider similar measures. The volatility wasn’t entirely pandemic-driven, however. On November 22, Joe Biden announced his intent to re-nominate Jerome Powell to serve a second term as Chair of the US Federal Reserve, meaning Powell will maintain in that role for another four years.

Markets reacted favorably to the news, but with new job security in hand, Powell signaled the Fed may speed up its plan to reduce stimulus. In comments made to the Senate Banking Committee on November 30, Powell said the Fed may accelerate the tapering of its bond purchasing faster than the formal timeline announced four weeks earlier. Powell’s sudden willingness to become less dovish led the Dow to drop another 652 points.

Inflation, of course, is what’s behind the need for Powell and the Fed to adjust their policy. The latest data shows American consumer prices jumped 6.2% from a year ago, the most significant inflation in 30 years. The year-over-year rate of inflation had been 5.3% a month earlier. Powell is finally acknowledging these trends are not so transitory after all.

Oil prices surged 12.3% from September to October, which led to the US government’s decision last month to release 50 million barrels from our country’s strategic oil reserve. It’s a tool meant to increase supply and reduce prices. And it worked. After oil (and gasoline) prices had more than doubled in the previous 12 months, crude oil prices fell 21% in November. West Texas Intermediate Crude finished the month just above $66 per barrel (down from nearly $84 per barrel a month ago).

Bond yields initially climbed in November before retreating. The 10-year US Treasury yield got as high as 1.67% on November 22, then fell to 1.44% as equities sold off. Gold lost 0.7% in November.

The federal government’s long-awaited infrastructure package was officially signed into law last month. $1.2 trillion in spending will be allocated toward traditional infrastructure improvements (roads, bridges, airports, Internet access, etc.). A separate bill related to “human infrastructure” is still being debated in Congress.

 

 

 

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The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

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MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

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