It looked like smooth sailing in the markets for most of November, until volatility decided to show up uninvited to the Thanksgiving festivities.
A new variant of Covid, combined with ongoing inflation jitters (more on that below), caused stocks to dip during the last week of November. Large-cap growth stocks were able to hang on for a slight gain, helping the Nasdaq 100 add 1.80%. However, most major US stock indices finished the month negative, with losses of 0.83% for the S&P 500, 3.73% for the Dow, and 4.28% for the small-cap Russell 2000.
International stocks were also lower for the month, with emerging markets falling into negative territory on the year. Slower economic growth and geopolitical risks have continued to be a headwind for overseas companies.
With many growth-oriented asset classes pulling back, aggregate US bonds ended the month slightly positive as the 10-year Treasury yield dropped from 1.55% to 1.43%.
Despite the end of month pullback, and the plethora of negative headlines, major US stock indices remain within arm’s reach of recent all-time-highs. Nonetheless, investors will be asking Santa for a December rally as we wrap up the year.
Zillow? More like Zil-LOW…
Following a stellar year in 2020, the famed house-hunting brand has seen its stock price plunge 60% so far in 2021.
With housing prices and demand remaining strong, what exactly happened to Zillow?
After reporting a large quarterly loss, the company announced the end of its iBuying program (its attempt to enter the house-flipping business). Labor and supply shortages unexpectedly increased the cost of repairs, cutting into margins.
Furthermore, the formula Zillow used to find deals was faulty, as it couldn’t factor the granular details of local real estate markets.
With the program winding down, Zillow still needs to offload approximately 18,000 houses, which it expects to do over the next year at an average loss of 5% to 7% per house.
The Consumer Price Index (CPI) experienced its highest year-over-year increase since 1990, jumping 6.2% in the most recent report.
This was the sixth straight month with a reading of 5% or higher, after averaging around 2% for the past decade.
Multiple factors have contributed to increasing prices, such as supply chain bottlenecks and unprecedented stimulus for the pandemic.
While prices have been surging higher for longer than originally anticipated, the Fed still expects this to be temporary (though Jerome Powell stated the Fed will consider winding down stimulus measures more quickly if needed to cool down inflation).
Some of the more notable price increases? Gas prices are 50% higher than last year, used vehicles are up 26%, and bacon is up 20% (that turkey sausage doesn’t sound too bad now).
Broad Market Returns
| Index | 1 Month | 3 Month | YTD | 1 Year |
| S&P 500 (VOO) | -0.73% | 1.30% | 23.18% | 27.79% |
| NASDAQ (QQQ) | 2.00% | 3.77% | 25.97% | 32.14% |
| Large Cap Growth (VUG) | 0.71% | 3.23% | 25.37% | 30.59% |
| Large Cap Value (VTV) | -3.04% | -1.79% | 18.31% | 22.46% |
| Small Cap Growth (VBK) | -6.11% | -4.77% | 3.93% | 12.56% |
| Small Cap Value (VBR) | -3.02% | -1.19% | 22.09% | 30.39% |
| Developed International (VEA) | -4.64% | -4.90% | 7.03% | 13.06% |
| Emerging Markets (VWO) | -2.90% | -4.95% | -0.28% | 5.71% |
| REITs (VNQ) | -2.11% | -1.09% | 28.10% | 31.61% |
| Aggregate Bonds (BND) | 0.20% | -0.74% | -1.55% | -1.40% |
| Corporate Bonds (VCIT) | -0.34% | -1.74% | -2.08% | -1.53% |
| High Yield Bonds (JNK) | -1.30% | -1.86% | 1.60% | 3.77% |
| Long Term Treasuries (VGLT) | 2.62% | 1.63% | -3.13% | -4.26% |
| International Bonds (BNDX) | 1.06% | -0.47% | -1.55% | -1.20% |
Fun Facts – December Edition
- Bundle up – the first official day of winter is Tuesday, December 21. This is also the day with the fewest daylight hours of the year (winter solstice).
- In December 1803, France officially transferred control of the Louisiana Territory to the US (the treaty was signed earlier in the year). The Louisiana Purchase is considered the greatest real estate deal in history as the US paid France just $15 million (approximately 4 cents per acre). Wonder what that would go for in today’s market…
- In December 1953, the first color TV set went on sale for around $1,175.
- The “Santa Claus rally” refers to the seasonal tendency for the stock market to rally at the end of December. Theories for this include a boost from holiday shopping, people investing year-end bonuses, or just plain optimism fueled by the holiday spirit. However, like any market anomaly, there is no guarantee this will happen, as each year has its own conditions and circumstances that ultimately drive market movements.
Derek Prusa, CFA, CFP® and Ben Webster, CFP®
Co-Founders and Owners of Aspire Wealth
November 2021 Newsletter
