I’m starting up my videos on JubakAM.com again–this time using YouTube as a platform. My ninety-fifth YouTube video “Trend of the Week: Supply Chain Chaos Continues” went up today.
It’a always dangerous to construct a trend from Friday’s trading. Especially when the earlier part of the week has been so strong in one direction or another. (In this case, down, down, down.) Ahead of the weekend, stocks often reverse the trend from earlier in the week as sellers (in this case) decide that they don’t want to be quite so bearish until the market opens on Monday. So it’s not surprising that stocks gained today on nothing especially qualifying as news. But with all those caveats, I still found today’s action “interesting” and “perhaps” indicative of a future trend. Not only were stocks as a whole strongly higher–the Standard & Poor’s 500 rose 2.44% on the day–but technology stocks led the move to the upside.
This morning the Standard & Poor’s traded more than 10% below its January 3 high. That puts this big market index in correction territory. As of 1 p.m. New York time the S&P 500 was down 2.99%. And that S&P 500 is one of the better stories this year. The NASDAQ Composite is off 17% from its November 19 high. The small cap Russell 2000 is down 20%, putting it on the edge of a bear market.
For 2021 the total return–that’s price appreciation plus dividends–came to 18.59%. That was a slight improvement on the 15.71% total return for 2020. The dividend yield for the portfolio in 2021 came to 3.13%. That was a slight drop from the 3.43% yield in 2020.
Today, the Federal Reserve released its minutes from its December 15 meeting of its interest-rate setting body the Federal Open Market Committee. Investors and traders didn’t like what they thought they heard–a growing consensus on a first interest rate increase at the March meeting.
In other years this would clearly be the time to jump into China stocks. What we have right now is a classic, tried-and-true set up for big gains from buying China stocks. With a “but” or two that suggests a cautious strategy. But I will be buying shares of Tencent Holdings and the FXI ETF on Monday, January 3.
Looking ahead at 2022, it’s not too hard to list the forces that will drive the financial markets. Putting those forces together and blocking out a schedule for their effects on the stock market. Well, that’s a lot harder. But let me try. Here’s my take on what’s ahead for 2022–Part 1 anyway
If not now, when?
When I checked the prices on the 25 stocks I’m tracking in my Dip-O-Meter at the close on December 10, a substantial group had dropped from the November 28 price. Nvidia (NVDA), for example had moved down to $301.98 from $315.03 on November 28. Advanced Micro Devices (AMD) was down to $138.55 from $154.81. Tesla (TSLA) had retreated to $1017.03 from $1081.92 on November 28. Time to buy? Not yet, in my opinion. And how about for other stocks in my 25 buy on the dip candidates?
In late November non-resident cash flows to emerging market assets, excluding China, turned negative for the first time since March 2020 and the Pandemic global economic dip, according to the Institute of International Finance.
Lags are one of the toughest things to get right in figuring out how the economy operates and where it’s headed. For the last half of 2021 as the big Pandemic stimulus cash flows first fell and then dried up completely, economists have been looking for signs of a slowdown in consumer spending. But the slowdown has been slow to arrive–thanks mostly to the fact that many consumers saved a large percentage of that stimulus cash. Now, finally, it looks like consumers are drawing down those savings balances and that the savings rate is headed back to something like its historical norm.
Expect the the debate to go on. Are we seeing a top for this extraordinary rally? Are stocks headed to their first correction since dinosaurs walked the earth? (Actually stocks had their last 10% correction in February 2020 but almost nobody remembers because it didn’t last very long and soon stocks were on their way to infinity and beyond.) And will this correction be led by technology stocks, the stars of the last rally? Or is the huge and very quick drop in technology stocks and the smaller but still significant fall in a wider index such as the Standard and Poor’s 500 merely a rotation from one sector into another? For the record, as of the close on Friday, December 3, the S&P 500 was down 3.47% from its November 24 high. The NASDAQ Composite, with its heavier weighting in technology, was down 6.05% from its November 11 high.
I’m starting up my videos on JubakAM.com again–this time using YouTube as a platform. My seventy-second YouTube video “Recalculating the interest rate outlook for 2022” went up today.
