Watch the CPK Market Action Report: November 2021
Equity markets surged higher this month across the board. Are stocks about to hit the wall of a “best-case” scenario and stall out or will the Fed taper schedule, a massive decline in Covid cases and the ongoing economic recovery open the door to even higher gains from here?
Watch the Market Action Report now:
November 2021
INTRO TAG
Equity markets surged higher this month across the board. Are stocks about to hit the wall of a “best-case” scenario and stall out or will the Fed taper schedule, a massive decline in Covid cases and the ongoing economic recovery open the door to even higher gains from here?
That action starts, NOW!
INDEX PERFORMANCE RECAP
The major indices were able to find solid footing this month and post some sizable gains. The Dow Jones Industrials were up 5.57% and S&P 500 posted a 6.68% gain. Meanwhile, the tech heavy Nasdaq led the pack gaining 6.92%
EQUITY UPDATE
Earnings season kicked off with a pretty big bang this last month. While several of the companies reported phenomenal numbers, we have started to see the concerns I warned you about over the last couple of months come to life. A few notable companies Facebook, Amazon and Apple all posted a miss on their earnings for the third quarter. A deeper dive into all of them still shows very strong numbers even with the miss. Nobody really knows if this is just a temporary setback from the chip shortage and a backlog of inventory or if it is a sign of much larger trouble on the horizon. In my opinion, stocks are still pretty much priced to perfection. While that doesn’t mean they can’t continue to grind higher into year end, I think it would be hard to have a substantial breakout from here.
BOND UPDATE
Shorter term treasuries spiked higher while the longer end of the curve fell. What does this mean? Generally speaking, falling yields for longer maturity bonds are a bullish indicator for equities. Inversely, a sharp decline in the yields of longer term bonds will suggest inflation is getting out of hand and that the Fed is falling behind the curve traditionally causing them to overreact by tightening policy beyond what is necessary, effectively choking off growth and killing the bull market.
While we remain a ways off from that, a sharp rise in the 10-2’s spread to a level of 2.5% would be a sign that inflation has indeed accelerated too quickly and would call for much more aggressive action from the fed.
COMMODITY UPDATE
Crude oil popped another double digit gain this month of 11.84% closing out at another new high for the year at $83.40 The uptrend in oil remains intact, but the risk of further profit taking does exist, especially if the dollar stabilizes and turns back towards the YTD highs.
Copper was able to break above the $4.75 mark mid-month before retracing a bit but still making a nice gain of 7.71% and closing at $4.38. As I stated last month, the line in the sand to watch is $4.00. Any further weakness or a break below the $4.00 level would suggest that broad market volatility is looming.
Gold was able to chop itself slightly higher this month to $1,778.20/oz. The market for the precious metal remains range bound for now with support at $1725 and resistance at $1,835. As I stated last month, if the yellow brick continues to face strong headwinds from a rise in the US Dollar and Treasury yields, the outlook will become even more bearish.
CURRENCY UPDATE
The dollar experienced another nice rise to just over $94.50 before less than dovish news out of the ECB precipitated a decline back to just over $94 where it started the month. I would expect the dollar to remain in a trading range of $93-$95 unless there is a change in the outlook for Fed tapering of QE
ECONOMIC UPDATE
Broadly speaking, economic reports were all very solid indicating consumer demand remains very healthy and resilient. Labor shortages, supply chain constraints and elevated price pressures all are still concerns, but on balance the outlook for the broader economy remains solid for the coming months and that leaves the economic pillar supporting the equity market rally intact, for now.
THE WRAP
While stocks continue to grind higher, I still believe equity markets as a whole remain a bit overstretched. Other than the fact that the Fed has yet to be proven that they are behind the proverbial eight ball in their stance with inflation, I struggle to find a catalyst that would indicate a substantial move higher from here. As such, I continue to remain comfortable in taking a more cautious approach towards finding growth for the time being.
CPK FOCUS
For the month of November, the cash allocation in our equity models remains between 30% and 40% due to the model’s more aggressive nature. Our broad focus remains on Domestic Equities and Commodities.
For Domestic Equities, our attention remains with just Small Cap Growth and Mid Cap Growth with our sector emphasis to the Consumer Cyclicals, Financials and Technology sectors.
As for Commodities, our focus remains on Energy and Industrial Metals.
CPK DISCLAIMER
As a reminder, my current allocation is not a recommendation. Regardless of what happens next, investors like you need to have a simple and yet solid financial plan that reduces RISK, COSTS and TAXES while securing the necessary income you need to maintain your lifestyle throughout retirement.
If you don’t have a plan OR you’re not comfortable with the plan you have, call me today to get pointed in the right direction.
I’m Chad Kunc and that puts a wrap on the November 2021 Market Action Report. Thanks for joining me. It’s time for me to get back to the markets.
For this guy, that action starts, NOW!