November 8, 2021
Good morning,
Last week was the 5th straight week of gains for the S&P 500 and it was the 3rd straight week of gains for the big three U.S. equity indexes – the S&P, Nasdaq and Russell 2000. That said, there were two even more notable mentions from last week’s action. While the S&P and Nasdaq were up +2.03% and +3.08% respectively on a Total Return basis, the Russell 2000 jumped +6.11% on the week.
There was a time not all that long ago where +6% was an okay, better than a stick in the eye, annual return. Quite recently, a +6% return in a month was reason to celebrate. But +6% in a week! The other notable price action last week was in bond-land – the 10yrT rallied enough to drive its yield from 1.55% on Monday to 1.45% at week’s end. These two notables are not unrelated, but are eye catching all by themselves given all the signs of higher inflation of late.
Yes, I hear you, this streak of gains cannot persist much longer. Must it completely revert in some kind of crash landing? Actually the hangover from these kinds of not so rare streaks are, on average, fairly benign. On average is the key of course, but think about it – many days of up markets are by definition bull markets, corrections in bull markets are more shallow and of shorter duration on average. There is little doubt at this point that we are in the seasonally favorable part of the second year of the cyclical bull market that began in March 2020 with a Fed who has just orchestrated the most benign Taper ever imagined. The tape and Fed remain favorable – we remain invested.
Be well,
Mike