“In terms of my profession, I'm passionate about financial literacy. I want to live in a financially literate society. I want kids to understand the importance of savings and investing. I want to try to replicate the great savers who came out of the Depression, the best savers the country has ever seen. It's crucial that people understand the importance of financial literacy, because it's actually life-saving.”
- Mellody Hobson, Co-CEO of Ariel Investments

Happy Wednesday,

The S&P, Dow, and Nasdaq were up and down in November. That followed a robust October where the market was up broadly across that board. In November, the S&P was down modestly 0.8%, the Dow was down 3.7% and the Nasdaq increased 0.3%.

In our view, the markets continue to be driven by the Covid-19 recovery phases, government support payments and the support of the Federal Reserve. There continues to be an optimistic feeling regarding the re-opening of the economy, even though the Omicron variant poses some risk. The Biden Administration vaccine mandate for firms with more than one hundred staff is still in flux, but hopefully this will help to push the unvaccinated percent down.

In addition, the probability of a modest tax reform later this year is adding to that uncertainty. Countering that is the finalized $1.2T Infrastructure Plan that become law in November and the larger and broader bill of economic reform which has been trimmed to ~$1.5T. Therefore, we believe the markets will remain a bit uncertain, with small pull-backs becoming a regular event for the rest of Q4 ’21.

That said, November was a good month and a great continuation to Q4 ’21. Our public equities portfolio, which includes a significant amount of hedging, is up more than 12% YTD, up more than 15% on a one-year basis, and up more than 12% on a ten-year basis. In our view, growth and value are both helping to propel the market higher, but at a much slower pace which is more consistent with history.

The S&P went down 0.8% to 4,568 in November, as the markets focused on many positive developments and some negative Covid and political developments.
The Dow was down 3.7% to 34,493 in November, as the markets continued the un-even rotation into value investments, especially industrial and consumer staples.
Nasdaq increased 0.3% to 15,545 in November, as Tech stocks remained strong.

In November, Covid-19 infections, hospitalizations, and deaths in the U.S. continued to trend lower, but the Delta variant continues to take a toll in select low-vaccine areas of the country and the Omicron variant could add additional pressure. Additionally, M&A transaction volume continued to be robust, and the Fed continued its unprecedented support of the economy. The Housing sector also continues to be a bright spot with strong consumer demand thanks to low-interest rates.

In December, we believe public markets will continue the slow rotation to value and industrial stocks and that overall returns will be positive, but mixed. That is not to say that growth stocks do not have a place in this robust economy. They do, but they will have to share the limelight with value stocks. We expect to maintain the cash/bond portion of our public equities portfolio at 6.5% in December.

We especially like the Financial and Industrial sectors where values are more reasonable, and growth should increase as the country opens back up for business. Morgan Stanley, B. Riley, JP Morgan, Microsoft, Berkshire, J&J, United Health Care, BofA, Microsoft, and Honeywell all continue to be top selections as we view them as stronger and more nimble competitors in their respective sectors. View our latest Top 10 investments here.

Thanks again for your consideration & for sharing your thoughts and ideas with us. Have a wonderful December and Holiday celebrations ahead!

Best regards,
Marlene

Marlene Oddo
Partner
PointFour Capital, LLC