The Long and Short of it, week ending 03 Dec 2021

Publication Type: Market Commentaries

Another volatile week for U.S. stock markets with uncertainty surrounding the Omicron Covid
variant and a potentially more aggressive Fed knee-jerking stock prices lower throughout the week.
Monday’s sharp rebound from the previous Friday’s selloff was short-lived with re-emerging
Omicron fears compounded by Fed Chairman Powell’s hawkish testimony before Congress on
Tuesday. Acknowledging current inflation could no longer be described as “transitory” and positing
the pace of tapering could be increased, Chairman Powell’s comments drove stock prices
significantly lower Tuesday. Comments from Moderna’s CEO questioning the effectiveness of
current vaccines against the Omicron variant added to Covid-related concerns. Wednesday’s report
of the U.S’s first Omicron case drove stock markets lower once again though all of Wednesday’s
losses were recouped Thursday as investors re-examined Covid-related concerns. Friday’s NonFarm Payroll report, showing a meager gain of 211,000 jobs but also a reporting a lower
unemployment rate (combined with an increase in the labor participation rate), seemed to increase
investor uncertainty with stock markets again ending sharply lower on the day. The 10-year U.S
Treasury rate moved lockstep with stock markets, increasing when stock prices increased and falling
when prices fell, reflecting the view a more aggressive Fed would act to slow growth resulting in
lower rates and stock prices. Also of note was the Nasdaq Composite Index fared the worst last
week, seemingly reflecting greater investor concern of slower growth due to faster Fed tightening
than to Omicron. For the week, the S&P 500 Index decreased 1.2% to 4,538.43, the Nasdaq
Composite Index fell 2.6% to 15,085.50, the Dow Jones Industrial Average declined 0.9% to
34,579.55, the 10-year U.S. Treasury rate decreased 12bps to 1.36% and the U.S. dollar (as
measured by the ICE U.S. Dollar index - DXY) strengthened less than 0.1%.

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The Long and Short of it, week ending 03 Dec 2021

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