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Things you need to know –

  • Stocks push higher and higher as investors and PM’s do some window dressing
  • Oil – back in the high $70’s – on its way to $80+
  • Treasuries churning at 1.5% ish…. leaving many to wonder why?
  • Consider building in some downside protection for January/February
  • Try this version of Pasta Faggioli

Good morning…. Stocks continuing to enjoy the ‘After Christmas Sale’ – the problem is – there isn’t a sale going on!  Investors/traders and algo’s continue to take stocks higher as the Santa Rally continues…. A rally – that I was not sure was going to happen considering all of the noise- think FED policy, potential new FED members, a change in the FOMC members, inflation, interest rates, infections, legislative roadblocks to name just a few…….But – it has happened just the same…and for investors who did not panic 3 weeks ago – they are also enjoying the waning moments of 2021 as stock prices push higher and higher……and higher…..

With the new year only 50 hours away – many are setting themselves up for what they believe will continue to be an economic rebound in 2022 all while newly diagnosed covid cases reaches another daily record high yet none of this is causing the same panic it did nearly 3 weeks ago….We are apparently becoming much more comfortable with this latest variant  – acknowledging that while it may be ‘more’ transmissible, it is not ‘more’ deadly for the majority of the world’s population that have vaxxed.  And so – stocks around the globe move on.

By the end of the day yesterday – the Dow gained 90 pts, the S&P up 7, the Nasdaq gave back 15 pts (after rising 800 pts in the last week), the Russell added 3 pts and the Dow Transports gaining 75 pts.
Investors have been trying to put the Omicron breakout into perspective as gov’ts and multinational companies around the world attempt to impose a new round of restrictions to try and slow the spread. NY, NJ, DC, and MD all experiencing a surge in new infections….and these are some of the MOST vaccinated/boosted states…which causes both concern and confusion for so many….

Airlines continue to cancel flights at record levels amid staff shortages – which leaves one to wonder if employees are taking advantage of this latest surge…. I mean – WHO is going to question you?
Apple for one – has shuttered all its NYC locations to shoppers as the virus continues to wreak havoc on the city.  (Interesting that they have NOT closed any other stores around the country.) Customers, though, will be able to order online and then pick up those orders outside on the sidewalks.  Dramatic?  Yes……but Apple qualifies their decision by saying that they ‘regularly monitor conditions and will adjust both our health measures and store services to support the wellbeing of customers and employees’.  All this as the CDC just lowered the quarantine requirement (for those that are vaxxed and boosted) and studies show that infection results in a milder illness and lower risk of hospitalizations.  The unvaxxed are the ones that remain at the highest risk – but they know this by now….and that message has been hammered home over and over.

10 yr. Treasuries ended the day yielding 1.54%, which is still confusing considering that inflation is pushing nearly 7% and the FED has made it crystal clear that they are set to move in the new year……Bond experts tell us that the reason for this is that there is still massive demand for US treasuries from Foreign Sovereign states, Insurance Companies, Pension Plans and of course the FED…(others believe that the FED will remain dovish no matter what they say)… they continue to buy treasuries even as they tell us that they are paring it back.

Remember – in January when the CPI was only 1.4% – treasuries surged from 1.25% to 1.78% in 3 weeks on the anticipation that the FED was going to start ‘thinking about a change in policy’…..Stocks took a swift hit – Nasdaq stocks sold off hard with the index losing 12% (individual names even more) the S&P gave back 6%, Dow names gave up 4% while the Russell lost 10%.  And today, inflation is running at nearly 7% and stocks are kissing closer to their 2021 highs.  So – something must give at some point…. because remember the adage – Stocks can remain irrational longer than you can remain solvent……and while the irrationality right now is to the upside (and that is good if you are invested) we know that this can’t go on forever…. And so, it’s about balancing out your portfolio for what is expected to be a turbulent time in the coming months.  And let me be clear once again…. balancing out your portfolio does not mean ‘panic sell’ at all….it just means allocate new monies to sectors that are expected to do well in the rising rate, inflationary environment that many street analysts acknowledge will continue thru 2022……and while the administration will tell you that inflationary pressures will subside by April – I say ‘challenge’.  Recently in fact, the Social Security Administration announced that they are raising monthly SS checks by 5.9% in 2022 – the LARGEST jump in 40 yrs.……do you know what 40 yrs. ago was?

It was 1981…inflation was 10.32%.  Just sayin’ – So you must ask, is the gov’t telling us something?

In any event – it is what it is….and you should prepare yourself for some turbulence in the months ahead.  So maybe that means going long some names that will benefit if the indexes (and thus the stocks) get hit…..Take a look at DOG (Proshares Dow 30 Short), SH (Proshares S&P short) PSQ (Proshares Nasdaq short) or the VIXY (Proshares short term VIX ETF)  – and while there are so many other ways to hedge yourself  – you have to start somewhere if this is all new to you……Adding these ‘contra’ names to your portfolio will help blunt any swift moves lower in the markets (when, not if, that move comes.)  Understand though, that these names are not meant to be ‘long term holdings’ at all…. they are considered more short term and need to be managed a bit more closely – which is why you should be talking to your advisor if you are concerned.

Yesterday saw only 3 of the 11 S&P sectors lose ground…. Financials, Communications and Energy all gave back just a bit – but remain up by 33%, 16% and 47% respectively ytd. Healthcare, Utilities and Staples led the way higher, the value trade SPYV – was up 0.25% while the growth trade SPYG – was flat.
Oil ended the day higher – up 60 cts at $76.59/barrel and this morning is churning right in line.  Recall that Oil – came under fire when news of the new variant hit tape….losing 25% in 2 weeks as renewed talk of ‘disaster’ permeated the psyche…..many telling us that Omicron would be the one to destroy demand…..and traders and algo’s hit the SELL button…..Recall, how I was not buying that argument at all and kept debunking it every morning…and where are we now?  Well, we have regained the 25% that we lost, we are now on the ‘north’ side of all 3 trendlines (bullish) and are heading back toward $80 barrel.  As I told one of my twitter followers who challenged me at every turn – screaming about how oil was set to collapse when it was trading at $64/barrel – ‘We would see $80 before $60’….and now we are just $4 away from that target.  Look – energy demand is not going away anytime soon….it just isn’t…the move to renewables is under way and that is good, but that is not happening in the new year or the year after that…Capisce?

Gold has been hugging all 3 trendlines at $1800/oz and is poised to move UP before it moves down significantly.  It needs to pierce $1804/oz and hold – that is less than $1 from where it is right now.  If I am wrong and it fails – then look for it to find support in the $1775 ish range.

US futures are up again this morning…. As Santa makes his way across global market centers…. Dow futures are up 45 pts, S&P’s up 8, Nasdaq up 32 pts and the Russell is flat.  European markets are also all up across the board by about 0.25%…and Asian markets ended mixed but nothing to write home about.

We are in the final hours of trading for 2021…. lots of window dressing, tax loss harvesting and rebalancing going on as portfolio managers try to ‘doll up’ their holding at the end of the marking period.
While many economists are adjusting (read lowering) their 1Q 2022 forecasts for economic growth, investors do not appear to be concerned that this will disrupt the story yet….as money continues to pour into stocks.  Look – I can’t find anyone that thinks – covid or any of its derivatives is over or even going away anytime soon…. but what is clear is that investors are NO longer allowing it to control their investment decisions……as they take stocks to new highs.

Remember – moves are amplified during this week – many participants have closed shop for the week – leaving inline liquidity weaker than what it might normally be.  Voids in prices levels can force moves in either direction to be more exaggerated and that is what I think is happening, but no matter – it is happening….and stocks are rising, and portfolios continue to benefit.  So, enjoy the ride while it lasts.
Bitcoin is trading at $47,500 while Ethereum is at $3750.

The S&P is kissing 4800….and if you draw a trendline from February 2021 – to now – it suggests that we should hit resistance at 4863!!!  Which is a 70 pt. move from here….  But again – this is a holiday week – many are away from their desks – much of the trading being done by algo’s….so go with it and get ready to get back to work in January.

Remember investing is dynamic not static…Pay attention and talk to your advisor.
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.

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Take Good Care

Chief Market Strategist, Consultant

Pasta Faggioli w/Pancetta and Sweet Sausage

This is a great easy dish – better if it sits overnight – but fine if it does not….

For this you need – 1 can of cannellini beans sliced garlic, thick-cut pancetta, cut into small cubes, sweet Italian sausage – removed from casing, 1 lg onion, thinly sliced, olive oil, vegetable broth, (or chicken broth), ½ box of ditalini (small pasta), s&p, & finely chopped parsley.

Begin by slicing some garlic and sautéing in a pan until golden…now add the pancetta and onion and sauté for 10 mins or so…. Next – toss in the sausage – turn heat to med high –stirring and breaking up the sausage meat – should be all done in about 10 mins or so.  Now add in the beans – water and all…. Now add in enough broth to cover the sausage and then some – simmer for 10 mins. Taste and season with s&p.

Now bring the heat to high and allow to boil…. add the pasta – do not add the whole box…. Remember, the pasta will grow and suck up the liquid – you do not want this to become dry….so keep an eye.

Always keep the pasta in enough liquid to cook – if it looks like it is sucking it all up – just add more broth – enough to keep a bit ‘soupy’ but not wet!  Should be done in about 8 mins.   Ladle the soup into bowls, add some of the chopped parsley and have fresh grated Parmegiana cheese on the table for your guests.

Buon Appetito.