In a holiday-shortened week, the Dow (+1.7%), NASDAQ (+3.1%) and S&P 500 (+2.3%) exhibited strong gains. Conversely, taxable bonds fell about 0.3% - 0.5%, and tax-free municipal bonds slipped by about 0.1%. Bonds reacted adversely with interest rates creeping up from their recent drop, as the 10-Year Treasury is approaching 1.5%, well below the peak of 1.67% reached in October and November. Interest rates typically drop when there is fear in the economy, as investors seek the safe haven of US government bonds. Thus, if a rise in interest rates is a positive sign for the economy, I’m OK with it, but within reason.
Stocks rallied on mixed news regarding COVID and the Omicron variant. As the variant is spreading rapidly in the US and across the world, there have been hints of lockdowns and restrictions, but that variant is also believed to have significantly less significant health effects than the other COVID variants. In very positive news, two pills will soon become available to treat COVID-infected patients. In other news, the most recent Build Back Better bill likely won’t be approved by the Senate, which is sending mixed reactions. In one camp, folks are seeking additional fiscal stimulus, while others are more concerned of its potential long term impact on future inflation and taxes.
In the last week of trading, there is typically less volume because many traders have taken the week off for the holidays. In times like this, lower trading volume can cause more swift markets movements. We suggest that you don’t let wild swings this week have an impact on enjoying your holidays. Have a great week, and Happy New Year to all!
The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.