After trading back and forth for six months stocks broke out of their range and set new highs early in November. The May highs were the target all summer, but the market was unable to attain them. In November investors came out strong and exceeded the May highs in most all categories.
This breakout was significant for the bulls. It was particularly notable that Small Caps and Mid Caps broke through their previous highs set as far back as March and April respectively.
Before the Thanksgiving holiday, the market was set for a great November. Then on the short trading day of Friday the 26th, the market turned down. By the close at 1:00 pm the Dow Industrials lost over 900 points that day. The financial reports pointed to a new variant of the COVID virus as the reason investors ran for the door. It was a Friday, and some investors did not want to hold over the week-end in case the COVID news worsened.
There was an attempt to recover on Monday only to see further decline the next day. On the 30th more concerns surfaced about the new variant, but also Fed Chairman Powell spoke and walked back the word “transitory” as it relates to inflation. He conceded that inflation is likely to be with us longer than he originally expected. These two news items are said to be responsible for the loss of all of Monday’s gains plus another 400 points on the last day of the month.
We are Still in a Choppy Market
We wanted the strong uptrend and new highs leading up to Thanksgiving to take us out of this choppy market we have experienced for several months. It certainly was possible, but now we are back in the same trading range again.
All the gains made in November were taken back plus some from October, as well.
Volatility is high so we should expect big moves in both directions in the short term.
When we step back and look at the big picture, the market is in a strong positive trend. There are indicators pointing to a continuation of the positive trend in the long term. Discretionary stocks continue to outperform Staples. Growth is back in favor over Value. The yield on the Ten Year Treasury remains above 1.4% which is positive for stocks. These support a continued uptrend.
If indicators start to deteriorate, then expectations for the long term may change.
Written by Connie C. Guelich, CFP, AEP, CLU, ChFC. This represents our views at the time of this writing, and it is subject to change. It is not intended to be personal investment advice. If you would like to discuss your own account, please don’t hesitate to call us.