Report (Premium Edition) 01-04-2022

Key Market Trends

Tip: Use this as a quick guide on the short-term direction (1-2 weeks) and long-term (1.5-5 years) of key markets. It is not a signal to buy or sell, just to show the trend. This is a quick cheat sheet to know the trend and help understand what is happening with the markets in the short term. I started making this section years ago because once had a client that would call me nearly every day asking the direction of the markets.

Dow36585.070.68%246.7636595.8236246.45BullNeutral
S&P 5004796.570.64%30.384796.644758.17BullNeutral
Crude (WTI)76.2310.34%0.25876.80175.678BullBull
Gold1799.8-0.06%-1.131808.481798.44NeutralBull
10 Year166.50%2.08%0.0341.6651.614BullBull
Bitcoin/USD465550.25%1174676645950BearBull
US Dollar Index96.4220.20%0.19696.45596.146BullBear
VIX16.610.06%0.0116.6116.34BearBull

S&P 500 Sector Trends

Tip: Use this section to know the performance of various sectors, weight portfolios, or look for trades. Modern portfolio theory stresses the importance of diversification, but recently several sectors like technology have outperformed others like utilities. This is also a way to narrow the sectors to find investment opportunities.

Sector Name5-Day Return1-Month Return3-Month ReturnYTD ReturnYTD Return vs S&P 5003-Year Return5-Year ReturnTrend
 Basic Materials0.00%5.60%11.10%-1.10%-0.30%90.00%88.40%Strong Bull
 Communication Services-0.70%4.30%-4.40%0.70%1.50%89.60%44.40%Bull
 Consumer Cyclical2.10%4.70%11.70%2.20%3.00%144.70%188.20%Bull
 Consumer Defensive1.50%8.30%12.00%0.00%0.80%66.30%69.10%Bull
 Energy1.70%5.30%6.40%3.20%4.00%16.60%-8.90%Strong Bull
 Financial Services0.60%4.00%4.30%1.10%1.90%78.10%81.70%Bull
 Healthcare-0.70%7.40%7.20%-0.60%0.20%79.10%122.00%Bull
 Industrials-0.10%3.10%6.00%-0.60%0.20%79.90%82.10%Bull
 Real Estate1.00%7.80%12.60%-0.80%0.00%74.00%68.40%Bull
 Technology-0.90%6.20%13.80%0.80%1.60%200.20%297.90%Strong Bull
 Utilities1.30%6.00%12.10%-0.90%-0.10%46.80%70.00%Neutral

Stocks & ETF Watch List

Tip: Use this section to find stocks and ETFs to add value to your portfolio by increasing the alpha (return) and decreasing beta (beta). Our list is updated monthly to help provide our readers with timely insights. Readers should do their own research before making any investment. In order to make our report easier to read, we are now including the stocks as lists for readers in separate posts.

All stock/ETF picks are updated and are now on one page. Click here to view them.

Free AlphaBetaStock's Cheat Sheet (No CC)!+ Bonus Dividend Stock Picks
  • Inflation Stock Picks: List of stocks that we think should perform better in a rising inflation environment. 
  • Auto Parts Stock Picks: Auto parts companies are likely to see their stocks rise as the average age of cars and light trucks increased from 11.9 years in January 2017 to 12.2 years in January 2021, according to new data from IHS Markit. Below are the top auto parts companies that investors should buy now before the profits roll in. 
  • Solid Picks: This group of stock/ETF picks is likely to experience growth and perform well into the near future. 
  • Dividend Stocks: List of stocks that have excellent dividends and business performance. 
  • Dividend Growth Stocks: List of stocks that have a history of growing dividends. 
  • Dividend ETFs Picks: This list of ETFs is selected for their ability to pay dividends. 
  • Dogs of the Dow: This list of DOW stocks based on H. G. Schneider’s Article in the Journal of Finance in 1951 that used the price-earnings ratio. The general idea is that blue-chip companies that pay a dividend are more likely to withstand an economic downturn. 

Key Drivers for the Week of Jan. 04

TIP – This is a brief bullet-point summary. It is a tool that gives investors and financial a fast and simple list of what to watch for and talking points for the week.

  • Omicron Cases
  • Rising Inflation & Fed
  • Tuesday – ISM Manufacturing for December (10AM)
  • Tuesday – JOLTS Job Openings for November (10AM)
  • Wednesday – MBA Mortgage Applications (7AM)
  • Thursday – Final Core Capital Goods Orders Growth for November (10AM)
  • Thursday – Final Durable Orders, Shipments for November (10AM)
  • Thursday – Factory Orders, Inventories for November (10AM)
  • Thursday – ISM Non-Manufacturing for December (10AM)
  • Friday – Manufacturing, Non-Farm, private Non-Farm Payrolls for December (8:30AM)
  • Friday Unemployment Rate for December (8:30AM)

Week Ahead: Rising 10YR Yields A Sign?

Yesterday, we reached a new record of 1 million new daily Omnicron covid cases, which experts are saying is due to the inability of vaccines to protect people. It doesn’t seem to be affecting the market because the symptoms appear to be much milder than the Delta, and hospitalizations for infections are down to around 1% versus nearly 18%.

The big news is surging US 10YR. We believe that it can be attributed to the realization of rising interest rates and the Fed pulling back.

This leads me to say that my top concern for 2022 is a Fed-induced recession or, worse, a financial meltdown. Historically, the Fed has come in to save the day, but Bearish sentiment is building.

The Fed’s interest-rate hike cycle could start causing economic problems in the second half of next year, which I believe is the greatest threat to the market.

BlackRock, the most significant investment company globally, stated that they are reducing investment risk because of uncertainty around 2022.

Doubleline’s Jeff Gundlach stated that events he expected to occur in 10-15 years “are accelerating toward that crescendo in economics and politics” and that rate hikes of 1-1.5% could “break the economy,” leading to recession. The bond market is “sniffing out weaker economies.” My base rate predicts that we’ll see trouble in the second half of 2022.

Gundlach states that “we are witnessing things that haven’t happened in 40- or 50 years,” like negative interest rates. Gundlach explains that rising prices for vehicles “will likely slow down the economy as we approach 2022 because automobiles are obviously long-term purchases.” This is because consumers will soon realize that their existing purchases are losing value faster than normal market conditions.

I remain concerned about what I see in the markets. For example, the S&P 500 recently reached its 70th highest close of the year despite economic weakness, and it hasn’t touched the 200MA in nearly two years. Once the Fed ends programs it used to boost market conditions, I will continue to be worried.

Tech Opportunity?

Tech stocks have seen a drop and loss of momentum from the pandemic, but it may be changing. This could be an opportunity for investors to pick up some stocks on a dip.

As investors struggled to justify the stock’s sky-high valuations over the past year, aided by a pandemic, growth sectors like cloud computing and software saw their shares drop at the end of 2021. The tech-heavy Nasdaq 100 Index outperformed the S&P 500 Index for the first time since 2016.

Companies like DocuSign (DOCU) have stated that they’ve witnessed a return to regular demand. This indicates that the remote connectivity software market was losing its tailwind. DOCU’s shares plunged more than 40% in a single day and now stand at around 50% of its July high.

However, there will be a high demand for technology in the years to come, whether it is cloud computing or connectivity. It won’t hit the pandemic peak. Look at how large companies handled their workforces at year’s beginning.

Like its competitors, Goldman Sachs (GS) is asking employees to work remotely. The investment bank giant instructed its employees to work remotely from January 18. GS joins other companies asking its employees to work remotely until January 18.

They’re not the only Wall Street bank to use this policy. Citibank (C), JPMorgan Chase, JPMorgan Chase (JPMorgan Chase), and Citibank (C) also work from home to begin the year. JPMorgan employees are expected to return to work at the start of February and others around the same time.

However, new COVID-19 variants have delayed these plans. Businesses are becoming more cautious as cases are increasing again. According to Dr. Anthony Fauci, Director of the National Institute of Allergy and Infectious Diseases, Omicron strain infections might not peak before January or February. This could impact the plans of some management teams.

However, other companies are not taking chances. Indefinitely, tech giants Alphabet (GOOGL), and Apple (AAPL), have suspended all in-office work.

This trend won’t be slowing down anytime soon. James Gorman, Morgan Stanley (MS) CEO, said companies will likely continue to work remotely until 2022. Gorman said it could even last longer, noting that there could be more strains in the months ahead.

Many people still work from home. Businesses will continue to rely on remote work technology. Software as a Service (“SAAS”) companies such as Salesforce (CRM), DocuSign(DOCU), and others will continue to experience increased demand for their products. Cloud service providers such as Microsoft (MSFT), Amazon(AMZN), Alphabet (GOOGL), Alphabet (GOOGL), along with semiconductor companies like Nvidia, Intel (INTC), Advanced Micro Devices, and AMD (AMD), will continue to see increased demand for their products.

Bottomline – Tech Opportunity?
The demand for digital services may not be as strong as during the pandemic. COVID-19 certainly has accelerated the digitization of businesses. This trend will continue, which will continue to drive increased demand for remote work equipment.

OIL – Bullish

Bitcoin- Bullish

Don't miss a thing

Get free professional market insights and stock/ETF reports that contain actionable opportunities written by a former financial advisor and Capitalist who has been investing in the markets for 20+ years.

FREE MARKET REPORTSDon't Miss An Opportunity

Get Free Stock Picks, Macro Market Events & Options Strategies.

Scroll to Top