December 2, 2021
Good morning,
If there were any doubts of the market’s discomfort with uncertainty, the past week’s market action has removed them. Markets have, rather violently, bounced around – down and to a lesser extent up – all week in reaction to pandemic headlines (and a surprise from Fed Chair Powell). Yesterday, in the midst of a meaningful bounce up, the market reversed course after the first Omicron case was identified in the U.S.
Futures overnight were up almost 1% just after midnight ET, but have faded to only up .25% as the cash market open approaches. The VIX is over 30, telling us nothing we haven’t already felt in our stomachs. Yesterday’s +1% open and then decline to >-1% loss at the close is fairly unique. It has only happened 19 times since intraday market data has been recorded (1980’s). A thin data set but a common thread from those days indicates extremely high daily volatility the day after a +1/-1 day like yesterday. There was no distinguishable pattern of the day after being up or down necessarily. So, I’m here to say that the biggest surprise we might see today would be a quiet session, and that in the likely event we have another wild one – just know that it’s normal-ish and don’t assign much value to it (especially worry). It’s the market’s short term reaction to uncertainty, just a bit of a tantrum before we begin to know more about the new variant.
See you tomorrow, and be well,
Mike