(Please enjoy this updated version of my weekly commentary from the Reitmeister Total Return newsletter).
I am back from a week long Hawaiian vacation (Ko’olina area of O’ahu). And, yes now I see the benefit of the 8 hour flight from Chicago.
Beach, mountains, waterfalls and PERFECT weather. The same 80 degrees every day.
Unfortunately the same wonderful consistency could not be said for the stock market. Volatility has been extremely high. Violent drops followed by soaring rallies.
As stated before my trip, I would be watching the markets carefully. But until there is a reason to fear that Omicron will do more economic damage than Delta…then there was no reason to get bearish.
So indeed I did nothing with our portfolio on the trip. And that proved to be the perfect solution as our portfolio gained nearly triple that of the S&P 500.
Now let’s get caught up on what is driving the market along with our trading game plan as we wind down 2021.
Omicron is very contagious. The soaring cases in and outside the US are undeniable.
And if you are a fan of sports, the number of teams ravaged by Covid is staggering with many games being cancelled or postponed in the NBA and NFL. (Certainly true for both my Chicago Bulls & Bears).
And in my personal life I have more close friends getting Covid now than at any other time since this all began. (All of them in New York where it seems to be spreading like wildfire).
Yet with all that being said, gladly the early signs point to it having fairly mild symptoms. Thus not surprising that the US government is doing everything BUT shutdowns. That’s because the lesson learned from the start of Covid is that the economic cost of shutdowns is far too high.
The above is the core reason I have not gotten bearish since the rise of Omicron. Because without the shutdowns there is little reason to believe in widespread economic damage that would derail the stock market.
Yes, certain industries that require travel or face to face interactions will see temporary slowdowns (hotels, airlines, cruise lines, restaurants etc). But the rest should get on well enough.
The most interesting economic event of the past week was from last Wednesday when the Fed announced a shift in their plans for bond buying and the raising of rates. This is a CLEAR statement on 2 levels.
First, they no longer see inflation as being “transitory” as declared early on. So they will decrease bond buying at a much faster pace. This will be followed by a more aggressive plan for raising rates in the future.
Now it is expected that they will have 3 rate hikes in 2022 versus 1. And then another 2-3 in 2023.
Second, they don’t see Omicron causing damage to the economy. Because if they had even the slightest concerns on that front, then they would absolutely NOT consider the above measures to remove accommodation.
Investors should take this as a sign that the 40 year trend of lower and lower rates is coming to an end. And that the bond gains you thought were as permanent as death and taxes are going away. In fact, don’t be surprised if you LOSE money in your bond funds in the years ahead.
Losing money in bond funds > greater interest in stock market > yet another reason to stay bullish.
The only other economic report of late worth a mention was the PMI Flash report showing continued health for Manufacturing (57.8) and Services (57.5). Once again, anything above 55 is an impressive rate of improvement.
I bet many of you were wondering if I forgot to send out any trade alerts whilst on vacation in Hawaii.
No…I was not in a Mai-Tai induced fog. Rather, the story remains the same. Even with as contagious as Omicron clearly is…I still don’t believe it will do that much economic harm…thus the bull party stays in place with no need to panic.
And gladly I didn’t hit trip over poolside lounge chairs to hit the sell button on Monday as many investors did with the S&P tumbling to 4,531. Because here we are just a couple short days later already bouncing nearly 4% from that intraday low.
All in all during my vacation we gained +1.70% while the S&P only rose +0.59%. Perhaps I should take vacation more often 😉
Is the worst of this market volatility behind us?
Maybe…maybe not. But until I see something that tells me that we are due for more serious economic pain, then I will keep our sails up waiting for bullish tailwinds.
What To Do Next?
Discover my top picks for today’s market.
I am referring to the current 12 stocks and 2 ETFs in the Reitmeister Total Return portfolio based on my 40 years of investing experience. Plus we lean into the benefits of the POWR Ratings model with it’s impressive +30.72% annual returns since 1999.
All you have to do to see my current recommendations is to…
Wishing you a world of investment success!
…but everyone calls me Reity (pronounced “Righty”)
CEO, Stock News Network and Editor, Reitmeister Total Return
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About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks. More...
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