Stocks declined for the holiday-shortened week, after Friday’s news about the emergence of a new, potentially more contagious, coronavirus variant in South Africa — Omicron. Before the Thanksgiving holiday, information technology stocks suffered, as rising Treasury yields made expected corporate profits far in the future less valuable in today’s terms. Yields then decreased on Friday amid the flight to assets viewed as safe havens due to the Omicron variant. Value stocks held up better than growth companies, despite Friday’s selling pressure on stocks related to leisure and travel.
The reappointment of Jerome Powell coupled with comments from members of the Federal Open Market Committee (FOMC) about the potential to accelerate the tapering of the Fed’s bond purchases contributed to the less-dovish outlook for Fed monetary policy, which helped push Treasury yields higher. The minutes from the November FOMC meeting, released on Wednesday, also showed that some policymakers advocated for an even quicker taper. These comments may be signaling the Fed’s concerns surrounding looming inflation.
President Biden formally announced that the U.S. will release oil from the Strategic Petroleum Reserve to try to pressure gasoline prices, which are a key part of headline consumer price inflation figures, lower. Oil prices actually rose on the news, which was widely anticipated, as the market seemed to think that the Organization of the Petroleum Exporting Countries and Russia (known as OPEC+) will simply reduce its production to offset the move.
Fluctuation in oil continued, however, as news of the Omicron variant sent the price of West Texas Intermediate crude oil, the U.S. benchmark for the commodity, plummeting more than 10% on fears that the new variant will damage demand for oil.
In a very mixed week, positive economic data—including the lowest level of weekly jobless claims since 1969—helped drive the early week increase in Treasury yields. The increases were particularly meaningful in short- and intermediate-term maturities. This trend ended abruptly on Friday, as investors fled to lower-risk assets amid fears that rising coronavirus cases could lead to renewed lockdowns and economic downturns.
Entering the Advent season, we await two promises – the birth of our Lord and Savior, as well as His promised return. The uncertainty in both the markets and in society, in general, often make waiting for anything a very anxious proposition. Proverbs 17:22 reminds us that the joy, hope and contentment that comes from the indwelt Holy Spirit is all we need during times like this (“A joyful heart is good medicine, but a crushed spirit dries up the bones”). Keep your spirits up!
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