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- Stocks saw downward volatility towards the end of last week. We saw global markets (represented by the MSCI All Country World Index) down -2.8% and domestic stocks (represented by the S&P 500 Index) down -2.2%. We saw U.S. small companies (represented by the Russell 2000 Index) lag in the market, being down -4.1%.
- The major news late last week was the discovery of a new variant of the COVID-19 virus in South Africa. The obvious concern is that major economies will be required to take precaution in limit travel and other areas. The combination of this news and thin trading volume due to the holiday caused equity markets to pull back on Friday.
- There were some ripple effects in the economy due to the new variant news. One effect was oil prices dropping quickly. On Friday alone, crude oil prices dropped 12% to $69 per barrel.
- It was announced last week that new weekly unemployment benefit filings fell to 199,000, which was the lowest total since 1969. The labor market continues to improve while employers desperately search for qualified applicants.
- The Federal Reserve released minutes last week from their regular meeting. It is becoming clear that several members are concerned over inflation and want the Fed to end the asset purchase program quicker to give flexibility to raise rates if needed. The main takeaway is that the Fed appears ready to make moves as early as mid-2022 if inflation happens to persist.
- With news around the new COVID variant last week, the volatility in markets has certainly picked up. As always, we urge investors to remain focused long term, and to view any sizable pullbacks more as opportunities rather than reasons to retreat from stocks. While market headlines will say it was the worst day in a while, investors need to keep perspective that the economy is in a good position and markets have performed very well. Even with the pullback last week, global stocks are up 15% this year.
- I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.
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