Edition #139 - Stock Market Update
My Thoughts on the Equity Market
Since publishing my “Investment Outlook for 2022” last weekend, I believe I made my general outlook quite clear for U.S. equities this year. On the aggregate, I expressed my belief that there’s a 70% chance for returns between -5% and +12%, and an 80% chance for below-average returns. While a 20% chance to achieve above-average returns sounds like decent odds, the market is already giving investors a run for their money to start 2022.
To say that stocks were “choppy” this last week would be a severe understatement, with each of the indexes pushing lower considerably. The weekly performance was:
• Dow Jones Industrial Average ($DJX): -0.29%
• S&P 500 ($SPX): -1.87%
• Nasdaq-100 ($NDX): -4.46%
• Russell 2000 ($RUT): -2.87%
Meanwhile, the Volatility Index ($VIX) gained +8.94% for the full week, at one point achieving a +22% gain. The primary culprit for the enhanced pressure on stocks was the U.S. Treasury market, which saw yields rise substantially. In fact, the 10-year Treasury Yield Index ($TNX) is now trading at the pre-pandemic level. According to CNBC, the 10-year yield of +1.766% is now roughly equivalent to the same level as it was in January 2020. Relative to the close on 12/31/2021, $TNX gained +17% last week, the largest weekly move since January 2021.
