A very Happy Holidays to you and your family! As you know by now, we shared some exciting news on December 6th: after a thorough and rigorous vetting process, we have selected BNY Mellon | Pershing to custody our clients’ assets going forward and will no longer be affiliated with Wells Fargo Advisors Financial Network. After this transition, slated for April 2022, Moran Wealth Management will become a Registered Investment Advisor. We’ve highlighted the transition and benefits on page 4 of our newsletter. In the coming months, we will be sending you further communication regarding the details of the transition. We are confident that this will be a successful and exciting development for all of the families that we serve, and demonstrates our continued efforts to offer the highest level of service and expertise for our clients.
The equity markets appear somewhat extended and priced to perfection. Recent market action has been primarily driven by inflation-related concerns, with the Omicron Covid variant as a contributing factor. Questions remain in investors’ minds over how the Fed will handle the tapering of bond purchases and subsequent interest rate hikes in 2022. Our view is that the Fed will likely end their tapering in the second quarter of next year, followed by two or three moderate interest rate hikes in the second and third quarters of 2022.
We look forward to welcoming you to our client luncheons this upcoming season. The first luncheon on December 6th at the Ritz Carlton Beach Resort was a great success! It was wonderful seeing so many of you there. We have three additional luncheons planned for 2022. Please see page 7 of the newsletter for dates and RSVP options. Finally, as the year draws to a close, you will also soon be receiving a mailing to elect your choice of wine, popcorn or a charitable donation as a thank you for the continued trust you have placed in us. As always, please contact our office if you have any questions or if we may be of help in any way. It is our privilege to be of service to you and your family.
MONTHLY MARKET COMMENTARY
The first 10 months of this year felt like a barrage of mostly good news: GDP growing at 6%, gatherings with friends and family happening again, travel and entertainment returning at a rapid clip, Consumer Confidence at all-time highs, interest rates range bound, real estate prices skyrocketing and the stock market up almost 25%. But the old adage is true: the only thing constant is change! In this note, let’s tackle what we view as the most significant changes and what might happen next.
Thinking on Covid
The new Omicron variant news hit front page on the Friday after Thanksgiving, resulting in a 2.3% drop in the S&P 500 for the day. We have no idea what the data will show on Omicron over the coming weeks. The news flow that we receive on Omicron could matter to the markets. If hospital numbers do not go up dramatically between now and year-end, this will likely be less impactful than it has been recently.
Thinking on Inflation
The Monday following the Omicron news, Federal Reserve Chairman Jay Powell changed his stance on inflation not being a long-term problem, “retiring” the word “transitory.” Unsurprisingly, this led to a volatile post-Thanksgiving week in the equity and bond markets. For the last 15 years, inflation has been extremely low, running close to 1.75% as measured by the consumer price index (CPI). One of the two mandates of the Federal Reserve is stable pricing, with 2% inflation being nirvana for growth as a country. The Federal Reserve has spent over a decade trying to fight “deflation” and has gone to great lengths to avoid it. Then came Covid and our economy screeched to a halt, causing gross domestic product (GDP) to drop over 30%. Factories shut, travel and services stopped, and many workers left jobs to reassess home and family. Stopping is easy, starting back up is much harder. Once the vaccines became available in early 2021, pent up demand for everything took hold and dwarfed supply at a time when supply was still shut down or constrained. Hence, prices went up, in some cases drastically…
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