Will Last Week’s Up Trend Continue Through Year’s End?: Market Commentary from Cabana’s CEO – December 13, 2021

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We ended last week’s commentary with a look at the major stock indices and pointed out that, despite an all-out sell off over the past few weeks, the broad market (S&P 500, Dow Jones and Nasdaq) held important technical support at the 50-day and 200-day moving averages. This supported the view that bulls still held the stronger hand and increased the odds of a move higher. We got that move on Tuesday as equites jumped more than 1% at the open and held those gains throughout the day. Wednesday saw more buying and after some consolidation on Thursday, stocks ended the week with more gains on Friday. All the indices broke a three-week losing streak, and the S&P 500 closed out the week back at all-time highs. The Dow and Nasdaq were within 2% of doing the same. The Dow transports were also at new highs, which is an important indicator of economic strength. FactSet is now forecasting Q4 S&P 500 earnings to grow at more than 20%. If this comes to fruition, we will have three quarters in a row of more than 20% growth for that bellwether index.  

Stocks traded lower this morning, with the S&P 500 falling below last week’s record level as we await a Federal Reserve monetary policy decision later this week and ongoing Omicron news. We continue to see the equal-weight S&P 500 (RSP) and small caps underperform the bigger market-cap indices, and that is a cause for concern. Some of this is likely due to the inflation outlook and the Fed positioning as a result. Nonetheless, it is part of the big picture and worth noting.  

You all know my perspective that at the end of the day it’s all about earnings, and they continue to move higher. Despite some ongoing volatility around the Federal Reserve and COVID-19, we think stocks will do the same going into year’s end. I believe cyclical sectors are likely to have the most wind at their back.  


February 23, 2021

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