A mostly positive month was overshadowed by the Black Friday disclosure that a new variant of the coronavirus, now known as Omicron, had been identified in South Africa and was spreading rapidly. For markets, it was déjà vu all over again. On the day, the S&P 500 fell 106.84 points, or -2.3%, the Dow 905 points, or -2.5%, and the Nasdaq 353.57 points, or -2.2%. And it wasn’t just equities that took a hit – oil prices declined 13% to about $68/barrel and emerging markets tumbled. Bitcoin, too, traded down.

For November, stocks were actually up 18 out of the 21 trading days. Nonetheless, both the S&P 500 and the Dow ended modestly in the red while the Nasdaq was slightly positive. Ex-Omicron the economic news was mostly good. October retail sales were up 1.7% and manufacturing output rebounded, rising 1.2%. Nonfarm payrolls jumped in October, up 531,000. Americans continued to quit their jobs in record numbers, as captured in the September Job Openings and Labor Turnover Survey (JOLTS). Whatever these 4.4 million newly unemployed Americans had in mind, there were plenty of other jobs available – the Labor Department reported a near-record 10.4 million openings that same month.

Inflation data continued to alarm. Consumer prices rose 6.2% year-over-year in October, a three-decade high. Producer prices were similarly elevated, up 8.6%. By month’s end, newly reappointed Fed Chairman Powell was formally retiring the word “transitory” in testimony before Congress. The markets began to price in a faster tapering process and a 60 basis points rise in the federal funds rate for 2022, according to a Bloomberg story. TIPS – treasury inflation-protected securities – rallied as the yields fell to the lowest on record.

The month’s last week (through Friday, December 3) was a bumpy one with the S&P 500 moving up or down more than 1.0% for five straight days and the CBOE Volatility Index (the VIX) hitting its highest level since January. The early December news on the jobs front was more mixed. On Wednesday, December 1, ADP reported an increase of 534,000 private sector positions. That was undercut by data out of the Bureau of Labor Statistics on Friday, which found that the economy added just 210,000 nonfarm payroll jobs against estimates of 550,000.  The unemployment rate fell to 4.2% and the labor force participation rate ticked up to 61.8%.

In the rarefied world of billionaire stock transactions, Tesla founder and CEO Elon Musk proposed selling about a tenth of his holdings on November 9, knocking $60 billion off the company’s market cap. In the event, Musk had offloaded more than $10 billion in Tesla stock as of December 2, according to Bloomberg. (But don’t worry, he has more.)

November and December have historically been among the best performing months for the S&P 500, according to the Stock Trader’s Almanac (via Reuters), up an average of 1.7% and 1.5%, respectively, since 1950. But the coronavirus has tossed a spanner into many of these historical patterns. We have already seen November underperform and forecasts for December should be viewed as more suspect than normal, at least until there is better clarity on the trajectory of the Omicron variant.

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