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Things you need to know –

  • Markets pushed higher into Christmas –
  • US futures are pointing up this morning as we begin the week
  • Treasuries holding steady at 1.49%
  • Oil down $1 as thousands of flights get cancelled (Opportunity!)
  • 2022 – will be an interesting year…. FED, Elections, Legislative Policy, and the Economy all top of the agenda
  • Try the Escarole and Bean Soup

Investors/traders and algo’s managed to push stocks higher on Thursday – in fact the S&P closed at a new 2021 high of 4725, after testing as high as 4740 – just 3 pts below the 4743 intraday high on November 22nd.

News that Omicron is ‘spreading like wildfire’ across the country doing little to nothing to destroy investor or algo appetite.   Investors apparently focusing on the ‘developments’ surrounding treatments for Covid and all its cousins…. think Delta, Omicron and what’s coming next.  News that the FDA has approved ‘covid pills’ manufactured by PFE and MRK helping to settle the mood and allow investors to focus on the ongoing recovery and what future FED policy will look like.  And yes, we heard plenty of news over the long weekend about flight cancellations, cancelled bowl games, cancelled Christmas and party plans – yet none of that appears to be causing the outsized panic that the Covid of 2020 did – and that makes sense, right? We are all learning to live with it, we are mostly vaxxed, we have therapeutics and investors are now putting covid in its place when it comes to investing…. how you manage your life is a whole different story.

Eco data showed that Durable Goods orders were up strongly – coming in at +2.5% vs. the expected +1.8%.   Consumer Spending came in right on target of +0.6% but analysts were quick to tell you that that was down from the rapid pace in November of 1.4% as they try to turn a positive story into a negative one.  Look – who is kidding who?  According to Mastercard – Holiday sales JUMPED by 8.5% y/y as consumers returned to shopping in droves…. spending more money on clothes – up 47%, jewelry up 32% and electronics up 16% with sales growing both in store and online.  Sales that started way back in September as the media convinced everyone that if they didn’t shop early, they risked being left with nothing under the tree as the mania surrounding supply chain shortages and labor supply issues topped the agenda.  Dept stores saw a 21% increase y/y while Online shopping surged by 11%. E-Commerce now totals 21% of all spending for the holidays.

That’s good news for retailers – XRT up 40% ytd – which is down from being up as much as 60% thru November 22nd.   I think the pullback was just the result of investors taking money off the table in the outperformers as they re-allocate money towards more defensive positions in 2022.  UPS up 26% ytd, while FDX is flat on the year, which makes zero sense to me considering all I see is FedEx trucks everywhere I look. Every time I turn around – the FedEx man is saying – “I’m Back!”.

By the end of the day the Dow added 200 pts or 0.5%, the S&P up 30 pts or 0.6%, the Nasdaq added 132 pts or 0.8%, the Russell up 20 pts or 0.9% and the Transports up 225 pts or 1.4%.
This is the final week of 2021….Saturday morning we will be in 2022….and get to start this all over…..the slate will be wiped clean – all of the indexes get reset to 0% and the focus will turn to fundamentals – as earnings season will begin in earnest on January 14th….with the release of JPM and the big banks…..JPM -which is +28% ytd –  is expected to announce earnings of $2.96/sh – but I do not expect Jamie to disappoint at all….Recall that in October – they were expected to report 2.97/share and they beat it by 28% – reporting earnings of $3.74/share.  What will he report this time around?  And more importantly – what will he say about what 2022 will bring…. Will the story be the same from not only the banks but sectors across the S&P?  Will a slowing economy, and a more hawkish (aggressive) FED cause investors to rethink the plan?

Now a funny thing happened to me over the weekend…..a twitter follower called me out because I said that if you were in the 40 – 60 age group – you should be ‘all in’ in terms of investing…..he chastised me because he thought not only was that ‘bad advice’ but he suggested that that age group should NOT be in ANY asset class – because there is too much risk!  Now, that’s comical….Don’t be in ANY asset class…my response to this fellow – was simple – All in – does not mean you own ‘high risk’ stocks with 100% of your portfolio – All in means USE your head, account for your personal risk levels, account for age,  account for other obligations you have, account for your health, and then speak to your advisor and allocate accordingly…..and if that means you put your money under your mattress – go for it!  See how that works for you!

Remember investing is dynamic not static…it requires at least a bi-annual exam – I suggest a quarterly exam, but some are happy to have an annual exam…. whatever your comfort level, it is…and that is different for everyone – so talk to your advisor.

There isn’t very much eco data to speak of and whatever there is will not be a significant driver for investors.  All the indexes remain below their 2021 highs – with the S&P the only one that appears to be ready to test that……all we need is an 18 pt advance to pierce the intraday high of 4743 and a 1 cent advance to notch another ‘new 2021 high’.  So – The question about the Santa rally is still up for debate…. because we are below 2021 highs…. the Santa rally suggests that we need to push to new highs before December 31st to have an official Santa rally….

The 10 Yr. treasury ended the day yielding 1.49% and is doing nothing this morning.   Oil – is off by 90 cts at $72.91 – all the flight cancellations being blamed for today’s weakness – It’s exhausting…. It’s the whole demand destruction story again.

The only two sectors that ended the day in the RED were Utes and Real Estate…. every other sector ended the day higher…with Consumer Discretionary – XLY being the leader gaining 1.4% while Industrials – XLI gained 1.2%.  The Value trade – SPYV and the growth trade – SPYG each gaining 0.6%.

This morning US futures are up …as we move into the final trading week Dow futures up 21 pts, S&P’s up 8, the Nasdaq up 38 while the Russell is flat.  The tone is positive and that is good.  But investors should understand the new year could bring some sudden swift moves – ones that will be painful for some while offering new opportunities for everyone.  Stick close – remember – investing is dynamic – which doesn’t mean you whip it all around every day, it just means get ready for a different market as the FED and other central banks prepare to change the landscape – a swifter taper and talk of 3 + interest rate increases before the fall.  Earnings guidance in January will set the stage for the year – as we learn what CEO’s and CFOs are expecting and then how they are planning on responding.  Eco data will be even more sensitive and significant as investors will look for any hidden data point within these reports that might suggest concern for the FED.

Look – Jay will be officially confirmed by the Senate in mid-January and then there are 2 or 3 seats to fill, who will Joey nominate, what will their positions be (hawkish/dovish) and who in the Senate will reveal what they want…. Expect to hear plenty from the far left as they try to reconstitute the US central bank AND that will be an issue for markets.

Then we have the fight – Mid-term elections are now 11 months away – so this year will be filled with all kinds of rhetoric coming from both sides as they each try to win your vote…. we have already seen that 26 Democratic House members are throwing in the towel vs. 8 Republican House members to ‘spend more time with family’. In the Senate we have 5 Republicans and 1 Democrat that will not return in January 2023.

It reminds me of the Dionne Warwick Classic – Promises, Promises…. (1968) Click below to hear this classic –

In any event – many strategists/analysts are calling for an economic slowdown in 2022 which will lead stock returns – to return to a more ‘normal’ level…. that is, if we can even define what normal means anymore.  I suspect we will see a return to the more moderate 10 – 12% returns all in – but that is nothing but an estimated guess (estimates range from flat to another 25% + yr)  – so much can happen that will change the course of markets in 2022…so sit tight, be a bit more defensive if your in the baby boomer camp and then move out accordingly on the risk scale depending on who you and what your ‘risk’ profile is as a  Gen X, Millennial and Gen Z.  It is sure to be an exciting year….

Remember you can text the word INVEST to 21000 on your cell phone to get my digital business card. Feel free to download it and send me off an email or text. Happy to engage and talk markets, planning, thoughts, concerns, and ideas.

You can follow me on Twitter and TikTok @kennypolcari and on IG @kennyp1961.
You can also find my daily videos on my YouTube channel – Kennypolcarimedia – My URL address here:
Take Good Care

Chief Market Strategist, Consultant

Escarole & Bean Soup

For this you need:  fresh mozzarella cut into chunks, pine nuts, olive oil, chopped onion, Yukon gold potatoes, peeled and coarsely grated, chicken stock (or veggie stock), fresh escarole roughly chopped, s&p, golden raisins, soaked in hot water for 5 minutes then drained.

In a large pot – heat oil over medium-high heat. Add onion, reduce heat to med and cook, uncovered, stirring occasionally for about 10 mins….  Next add potatoes and cook, stirring occasionally, about 5 minutes more.  Now add in the escarole and season with s&p.

Continue cooking, covered, stirring occasionally, until leaves are wilted and tender, about 10 minutes more; add 1 ½ cups of the chicken stock (or veggie stock) and bring to a simmer. Transfer contents of pan to a blender or food processor and purée until smooth; taste and season with salt if you need to…remember – the chicken stock will have plenty of salt – so don’t just add before you taste.

When serving – add chunks of the fresh mozzarella, some toasted pine nuts, and sweet raisins…. you can drizzle a bit more of the olive oil if you prefer….

Buon Appetito.