We have been saying recently that we believe the biggest headwind facing the markets right now is the significant change in policy by the Fed. However, there is little question that the larger drop in the futures this morning is due to the increase in the renewed lockdowns around the globe because of the jump in the spread of the omicron variant (and concerns that we could see renewed lock downs in the U.S.).
Yes, some blame is being focused on Senator Manchin’s decision not to vote for President Biden’s Built Back Better program, but it was becoming very obvious by mid-week last week that this was going to be pushed into next year, so this issue is having a much smaller impact than some politically oriented people would like to portray.
To be honest, we think the crisis in Turkey is probably having a bigger impact on the global stock markets than the political situation in DC…as the currency crisis in that country is quickly becoming a financial crisis. (The 12% decline in Turkey’s stock market over the past two days is throwing a wrench in the works for those who try to say that stocks are a great hedge against inflation.)
That said, we still believe that the shrinking “punch bowl” will give the U.S. market the bigger headwinds in 2022, but either way, it looks like this holiday shortened week is going to be another volatile one for the stock market. This morning’s weakness is going to take the S&P 500 Index below its 50-DMA, but as we’ve highlighted several times recently, we don’t see the 50-DMA as a very important support level right now. Therefore, if it breaks that line, it won’t be a big concern for us. The more important level is the early December ...
