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Gradient Investments Weekly Talking Points 11/26/2021
All data is for the week ended November 26, 2021.
Stocks
Equities fell across the globe following reports of a spreading new Covid variant called “Omicron” from South Africa, triggering the worst day of the year for stocks on Friday. For the full week the S&P 500 dropped 2.18%, the NASDAQ declined 3.52% and the Russell 2000 was down 4.13%. Overseas, the emerging markets (MSCI EM) fell 3.71% as the developed markets (MSCI EAFE) dropped 3.61%. Value outperformed growth stocks in the US as energy and staples were the leaders, consumer discretionary and communication services were the laggards.1
Fixed Income
Bond prices rose and interest rates fell, with the benchmark 10-year treasury ending the week at 1.48%, down 6 basis points.2 The new Covid variant has some investors expecting the Federal Reserve to hold off on raising interest rates.3
Commodities
The price of West Texas crude oil dropped 10.26% for the week to $68.15 per barrel following news of the Covid variant on Friday.4 Prices had been holding up following a decision by the U.S. administration to release up to 50 million barrels of strategic reserves in a bid to push down gas prices. The release was determined to be insufficient to offset rising demand up until Thursday. All eyes are now on the December 2nd meeting of OPEC which is forecasting a glut of oil in the first half of next year.5
Economic Data
Business investment (as measured by new orders for nondefense capital goods excluding aircraft), rose 0.6% in October compared with the previous month. This has been part of a solid trend in rising business investment this year and indicates that productivity is on the upswing during this extended period of labor shortages.6
Company News7
MercadoLibre, Inc. (MELI), a G33 holding, issued 1 million new shares, generating $1.55 billion. Proceeds are earmarked for general corporate purposes. That, in addition to a general selloff in growth stocks, caused the shares to drop 10.17% for the week.8
Sprout Social, Inc. (SPT), a G33 holding, dropped 13.89% last week on weakness for growth stocks, particularly small caps and software.
Travel + Leisure Inc. (TNL), a G50, Core Select and Contrarian Choice holding, declined 8.96% because many nations, including the US, are imposing some level of travel restrictions from areas with present cases of Omicron, causing investors concern about increasing levels of restrictions.
Did you know… In 1904, President Theodore Roosevelt hunted wolves in Oklahoma with Jack Abernathy, a local legend renowned for catching wolves with his bare hands. After seeing Abernathy in action, Roosevelt wanted to nab one himself. However, the Secret Service talked him out of it.
Mariann Montagne, CFA Portfolio Manager
Sources: 1 JP Morgan Weekly Market Recap 11-29-21 2 US Treasury 3 Barron’s, “Federal Reserve Rate Hike Bets Are Adjusted” 11-26-21 4 Oilprice.com 5 Barron’s “Oil Prices Hover…” 11-25-21 6 Wall Street Journal, “US Economy Accelerates on Spending…” 11-24-21 7 All weekly changes in company stock prices: Yahoo Finance 8 US Securities and Exchange Commission 11-17-21