Thanksgiving Week; Professionals Caught Offguard

Equity markets fell Thanksgiving week due to a deep Friday selloff in thin holiday trading. Professionals were positioned for a boring Friday in a shortened holiday week. Friday brought a combination of unexpected events, with the appearance and concerns about the spread of the Omicron variant resulting in a “sell first and ask questions later” attitude from many market participants.  More containment measures in Europe, and travel restrictions dampened investor sentiment in less than 12 hours as $35 billion in algorithmic selling washed into the S&P 500 on a holiday shortened trading Friday.

This has been a common trend for financial markets in response to Covid developments; markets focus first on achieving so-called “risk off,” and only then actually assessing the situation. However, even so, since making a new all-time high on November 22, the S&P is off that high by just about 3% at the time of this writing. The actual impact of the Omicron variant remains to be seen, but very early indications are that global policy makers may have panicked in their sudden and hasty response to this development.

The S&P 500 fell 2.2% on the week, finishing off with a 2.3% decline on shortened Friday trading. Consumer discretionary, telecom and technology were all down more than 3%. While oil dropped -14% at one point,  energy was the lone sector to hang on to a gain despite a slide in oil price to end the week.

For equity investors, it’s looking like the confusing, more volatile, period ahead may be showing up earlier than expected. As always, Oak Harvest continues to monitor these developments in real time. Growth concerns could increase given variant spread, but the market has performed exceeding well through the pandemic so far and we do continue to expect more gains in 2022, though with higher volatility, and several pullbacks and periods of chop throughout the year.

2021 performance was fueled by massive fiscal and monetary stimulus, which will most likely slow in 2022 and face higher inflation constraints. Our 2022 first half outlook will be released shortly under the title “Curb Your Enthusiasm Leads to a Bull Market Buy.” For long-term investors, staying calm, NOT panicking, remembering your financial plan, and staying consistent and steady with a long-term investment strategy remain key elements to remember. Take a moment and listen again to Episode Two of our Investor Mindset Podcast for a review of what to do when that “Do Something Now!” impulse starts to get stronger: “Do Something! (The Dangerous Impulse)

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