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THIS WEEK'S UPDATE

| January 31, 2022
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THE WEEK ON WALL STREET

An exceptionally volatile week, marked by wide intraday price swings, whipsawed

investors with stocks ending higher following a surge to the upside on the final

trading day of the week. The Dow Jones Industrial Average rose 1.34%, while the

Standard & Poor’s 500 gained 0.77%. The Nasdaq Composite index ended flat

(+0.01%) for the week. The MSCI EAFE index, which tracks developed overseas

stock markets, declined 3.54%.


MARKET VOLATILITY

Rising bond yields, Federal Reserve uncertainty, and escalating tensions on the

Ukrainian-Russian border unsettled markets all week. The week opened with two

successive days of deep early losses that were erased by furious, late-afternoon

rebounds. The following two-trading sessions that started with strong gains that

evaporated with late-session selling. The most dramatic session was Monday, in

which stocks ended slightly higher after hitting intraday lows that saw the NASDAQ

fall 4.9%, the Dow shed 1,115 points, and the S&P 500 moved well into correction

territory. Technology was at the epicenter of the volatility all week as rate fears

weighed on sector. Stocks rebounded strongly on Friday, managing to conclude a

week on an upbeat note.


FED READIES MARKET FOR RATE HIKES

Last week’s meeting of the Federal Open Market Committee (FOMC) left rates

unchanged, though officials signaled short-term rates would likely be raised at its

next meeting in March. As expected, the Fed also approved one last round of bond

purchases, bringing quantitative easing to an end by March. Left a bit more

nebulous were details on the pace and timing of reducing the Fed’s balance sheet, a

lingering worry of some investors. But Fed Chair Powell indicated that shrinking the

Fed’s asset holdings may occur at a faster rate than in past periods of balance-sheet

reductions, such as in 2014 and 2017.


THE WEEK AHEAD: KEY ECONOMIC DATA

Tuesday: ISM (Institute for Supply Management) Manufacturing Index. JOLTS

(Job Openings and Labor Turnover Survey).

Wednesday: ADP (Automated Data Processing) Employment Report.

Thursday: Factory Orders. Jobless Claims. ISM (Institute for Supply Management)

Services Index.

Friday: Employment Situation.


THE WEEK AHEAD: NOTABLE COMPANIES REPORTING EARNINGS

Tuesday: Alphabet, Inc.(GOOGL), Advanced Micro Devices, Inc. (AMD), Exxon

Mobil Corporation (XOM), PayPal Holdings, Inc. (PYPL), General Motors Company

(GM), Gilead Sciences, Inc. (GILD), Starbucks Corporation (SBUX), United Parcel

Service, Inc. (UPS), Stanley Black & Decker, Inc. (SWK).

Wednesday: Meta Platforms, Inc. (FB), AbbVie, Inc. (ABBV), Qualcomm, Inc.

(QCOM), Thermo Fisher Scientific, Inc. (TMO), Spotify Technology (SPOT),

TMobile US, Inc. (TMUS), D.R. Horton, Inc. (DHI).

Thursday: Amazon.com, Inc. (AMZN), Ford Motor Company (F), Snap, Inc.

(SNAP), Eli Lilly and Company (LLY), Fortinet, Inc. (FTNT), Skyworks Solutions,

Inc. (SWKS), Honeywell International, Inc. (HON), Prudential Financial, Inc.

(PRU).

Friday: Air Products and Chemicals, Inc. (APD), Bristol Myers Squibb Company

(BMY).


FINAL THOUGHTS

Corrections are a normal part of market behavior; it just doesn’t feel good when

we’re in the middle of one. There is no such thing as a garden variety correction,

nor a sweet taste behind the painful occurrence. Keep in mind a correction is merely

that, and not a substantive change of direction in our economy. November and

December fundamental data – housing, retail sales and consumer sentiment – have

exceeded expectations. While we find ourselves in the middle of corporate results

announcements, the results to date support the moderate economic expansion

underway.


I’ll leave you with a graphic that, in my opinion, sums up investing about as best as

possible. Real life illustrations of the tortoise and the hare. It shows Warren

Buffet’s Berkshire Hathaway (the tortoise) compared to Cathie Wood’s ARK

Innovation fund (the hare). Now, I am not endorsing or disparaging either. Both

may have their place in a diversified portfolio. However, the ARK fund run by

Cathie Wood has been touted as the future. It was really hot in 2020 as she owned

a great amount of technology that was levered to the stay-at-home

economy. Warren Buffet is often criticized as being past his prime and for holding

too much cash and for being too disciplined an investor. He doesn’t chase the “hot”

sectors. He minds his own business and focuses on businesses he believes are

undervalued. For a time it seemed like Cathie was the new “oracle” as her fund just

went up and up. No doubt, she owns some good business, but she paid premium

prices over the past few years for many that weren’t making any money. Sure, if one

had sold at the opportune time they would have enjoyed the quick run up. But, I’ll

stop rambling and let the graphic speak for itself.  Once again, we are reminded

investing is a marathon and not a sprint.

Have a good week!

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