All Good Things Must End: Market Commentary from Cabana’s CEO – December 20, 2021

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U.S equity markets have been on almost a straight upward path for more than a year, with no pullback approaching a 10% “correction”. This unusual period of easy times may be coming to an end. The emergence of the COVID-19 Omicron variant, coupled with rising inflation and a tightening of monetary conditions by the Federal Reserve, has resulted in all three major indices (the Dow, S&P 500 and Nasdaq) plummeting below their respective 50-day moving averages. The small cap Russell 2000 is well below its 200-day moving average with a decline of 14% since early November. Small caps tend to lead. From a technical perspective, we could see further declines drop the others to their 200-day moving average as well before this bull market has a chance to hold its ground. I personally think this is likely within the next few weeks. With all that is suddenly upon us economically, medically and emotionally, a re-set looks to me to be in the cards. The bond market agrees as the 10-Year Treasury yield is back down to 1.39% despite the Fed announcing an end to quantitative easing and interest rate hikes on the horizon. This fact alone suggests concerns about demand growth going forward.  

I will point out that markets don’t go straight down either and we may get a bounce before the down trend resumes. We are currently oversold, and December is known to typically see a stock rally at the end of the month. These are anything but typical times and we will have to wait to see what happens.  

Let me conclude by saying thank you to all our clients and partners for their support, belief and collaboration. Please take some time over the next few days to connect with family and appreciate all that is good in this world. Happy holidays!  


February 23, 2021

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