What’s trending in the market:

New highs: November started with a positive note for the stock market, following the strong corporate earnings released throughout October which showed high profit margins despite the supply chain issues and the environment of rising prices. Major indices such as the S&P 500 and the Nasdaq 100 have recorded new highs, with the relative strength index for the S&P 500 reaching a level above 70.

Inflation threat: The persistent threat of inflation is still hindering the speed of economic recovery and still spills over a negative impact on stocks. A higher than expected inflation reading was the trigger for a broad selloff in stocks from record highs. The CPI increased 6.2% in October from a year earlier. The expectation was for a 5.9% increase. Furthermore, Fed Chair Jerome Powell has indicated that inflation is not transitory, backing off his previous remarks that inflation is not here to stay.

Omicron variant fears: A new variant of the COVID-19 Virus has emerged from South Africa, posing a threat to the ease of economic recovery, and raising a question about how would governments deal with the new variant. In addition, the effectiveness of vaccines against the new variant is another concern that still needs to be addressed by Vaccine Makers. All of these issues have led to a massive selloff in the stock market globally.

Market performance and reactions:

Dow Jones Industrial Average

The Dow Jones Industrial Average started November with a positive note, reaching a new record high of 36,565. However, the huge market selloff has affected the Dow Jones the most, with the index falling around 6%, reaching a low of 34,424.

Nasdaq Composite

The Nasdaq composite had a different movement than the Dow Jones, with the index rising and retracing back twice throughout November. The index reached a new record high of 16,212, but then fell off directly due to the threats of the Omicron variant which sparked a global selloff in stocks.

S&P 500

The S&P500 index started the month on a positive note as well, supported by the strong demand for stocks and the solid corporate earnings. The index reached a new record high of 4,743 but then drifted massively as the other indices did.  

VIX Index

The VIX, also known as a gauge of fear among market participants, has been falling in October due to the strong corporate earnings that helped push stocks indices to record highs. The VIX was trading around levels below 20, before rising massively to reach a level of around 28, indicating the rising fear in global markets.

Yield Curves

Yields on 10 year notes have slumped throughout November, reaching low levels of 1.45%. furthermore, the yield curve has flattened, indicating that the difference between yields on 10 year notes and 2 year notes has declined.

Year to date recap:

*As of November 30, 2021.

Conclusion:

November brought with it extreme volatility to the financial markets. From indices hitting new record highs to the massive selloffs that occurred, investors saw multiple opportunities to inject cash into stocks, with the last day in November hitting a new record of money flow into the market, as investors poured a record $2.22 billion.

the last month of 2021 would be expected to continue to be volatile, as global indices are off their record highs and investors with buying the dip mentality would find the right opportunities to get into the market. In addition, the extent to which the Omicron variant would affect the ‘going back to normal’ ideology and the way the FED would deal with inflation would also be closely watched throughout December.

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The content published above has been prepared by CFI for informational purposes only and should not be considered as investment advice.  Any view expressed does not constitute a personal recommendation or solicitation to buy or sell.  The information provided does not have regard to the specific investment objectives, financial situation, and needs of any specific person who may receive it, and is not held out as independent investment research and may have been acted upon by persons connected with CFI.  Market data is derived from independent sources believed to be reliable, however, CFI makes no guarantee of its accuracy or completeness, and accepts no responsibility for any consequence of its use by recipients.