December 28, 2021
Good morning,
I hope you are well recovered from a nice holiday weekend and are prepared for another one ahead. It seems like our bull market has had a very spirited week as well, with no signs of slowing through next week. It appears that my cautious tone in these notes since Thanksgiving, with Omicron, the Fed’s pivot, and the first mild deterioration in the technical tape signals, were all misplaced. The S&P 500 set a new all time high again this week and is now a stone’s throw from another round number, 4800. This rally has been more narrow (fewer participants) and thinner (lower volume) than previous ones, but what aging bull market’s rallies aren’t?
We are approaching the beginning of the third year of this bull market, more frequent and deeper pullbacks, and higher volatility are the hallmarks of an aging bull before it ages out all together. Our first order job here is risk management, and we’ll likely talk caution and defensiveness on all pullbacks ahead of us, and we may mildly underperform the major indexes on the rallies following these pullback because one of these pullbacks will not be a correction …. it will be the beginning of something worse. It’s just the price that I think is worth paying, for preservation.
This is likely the last morning note of the year – see you next year! (a favorite kindergarten joke I shamelessly hold on to).
Happy New Year everyone – I wish you all health and happiness in 2022.
Be well,
Mike