December 2021

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Monthly Market Summary

• The S&P 500 Index of large cap stocks produced a -0.8% total return during November, outperforming the Russell 2000 Index’s -4.3% total return.
• Tech’s +4.5% return made it the top performing sector, followed by Consumer Discretionary +1.6% return. Communication Services -6.1% return qualified as the worst performing sector, with Financials close behind at -5.7%.
• Investment grade bonds generated a -0.1% total return, outperforming high yield bonds’ -1.2% total return.
• The MSCI EAFE Index of developed market stocks returned -4.5% during November, underperforming the MSCI Emerging Market Index’s -4.1% return.

Bad News Going Viral… Again.

The newest Covid variant, Omicron, surfaced the last week of November. First emerging in South Africa, the new variant is spreading rapidly. It will take weeks of analysis and incoming case data to fully understand transmissibility and disease severity. However, Omicron is already raising concerns for health officials. An initial review of Omicron's genomic sequence indicates it has picked up dozens of mutations, including those known to evade immunity and increase transmissibility. Health officials and researchers are concerned the high number of mutations may make Omicron more contagious and difficult to contain. Additionally, there is uncertainty about how much protection current vaccines provide against Omicron.

Markets Hate Uncertainty

Markets are understandably nervous about Omicron and sold off quickly following the news. Riskier asset classes, such as small cap U.S. stocks, emerging market equities, and high yield corporate bonds, underperformed during the final days of November. Interest rates declined as investors purchased U.S. Treasury bonds, while the yield on high yield corporate bonds rose as investors demanded more yield to compensate for a higher perceived level of risk. The price of a barrel of WTI Crude Oil plunged more than -15% during November on fears of decreased energy demand.

We believe a key leading indicator for the U.S. stock market will be Omicron cases in Europe. Covid data from earlier in 2021 regarding the Delta variant shows European Covid trends have generally led U.S. Covid trends by approximately 1-month. Initial cases in Europe suggests U.S. cases may rise in December. We caution the next few weeks will be full of speculation, but it is important to focus on the facts and data. And, while the Delta variant slowed third-quarter U.S. GDP growth, economic growth remained positive. New restrictions are likely to be reimposed, but consumers and business are more adapted to living with “the virus” now. But the uncertainty around Omicron may increase market volatility.

IMPORTANT DISCLOSURES

Clare Market Investments, LLC is a Registered Investment Advisor. This material is for informational purposes only. It is not intended as and should not be used to provide investment advice and is not an offer to sell a security or a recommendation to buy a security. This summary is based exclusively on an analysis of general market conditions and does not speak to the suitability of any specific proposed securities transaction or investment strategy. Judgement or recommendations found in this report may differ materially from what may be presented in a long-term investment plan and are subject to change at any time. This report’s authors will not advise you as to any changes in figures or views found in this report. Investors should consult with their investment advisor to determine the appropriate investment strategy and investment vehicle. Investment decisions should be made based on the investor’s specific financial needs and objectives, goals, time horizon and risk tolerance. Except for the historical information contained in this report, certain matters are forward-looking statements or projections that are dependent upon risks and uncertainties, including but not limited to such factors and considerations such as general market volatility, global economic risk, geopolitical risk, currency risk and other country-specific factors, fiscal and monetary policy, the level of interest rates, security-specific risks, and historical market segment or sector performance relationships as they relate to the business and economic cycle. See claremarket.com for additional information and disclosures. © 2021 Clare Market Investments, LLC

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