Stocks Taking a Hit, Omicron Impacting Inflation, and Will Tensions Overseas Effect Markets?

January 2022 has certainly started with a bang. While volatility is normal in markets, we want to explore some of the “whys”. Global PMIs retreat as Omicron does its thing. How many Americans are out sick? What might gold be telling us about inflation, hard assets, and crypto?

1. Almost 9 million workers were out sick last week. The ramifications will be felt, but fortunately it looks to be relatively short-lived. Have we heard this before?

Source: U.S. Census Bureau

2. We are all aware that it was a tough week for stocks. So far, we haven’t heard much from the “January effect” crowd…

Source: @acemaxx, @FT

3. Many tech and internet-based stocks have been feeding on the low-interest rate environment for years. Have rising interest rates changed the leadership of the stock markets?

Source: The Daily Shot from 1/24/22

4. The current leadership has undergone a much-needed correction. Where to from here?

Source: Statista

5. Coincidence? Will history “rhyme”?

Source: Thechartstore.com from 1/21/22

6. The do-it-yourself crowd loves to use options. Margin calls have exacerbated volume to the downside and may help fuel volatility:

Source: The Daily Shot from 1/25/22

7. The coordinated efforts of the Reddit crowd and others seems to have lost their unity and thus market “power”. According to JP Morgan Research, $1.36 billion of stock was sold by retail investors yesterday by noon. Capitulation, margin calls, or both?­­­

Source: The Daily Shot from 1/24/22

8. PMIs around the globe are mixed to slightly down, primarily due to the severity of the local Covid outbreak.

Source: The Daily Shot from 1/24/22

9. Here are the U.S. survey results which clearly show the effects of Omicron:

Source: The Daily Shot from 1/24/22

Source: The Daily Shot from 1/24/22

10. While markets like to climb the wall of worry, markets also abhor uncertainty. Wars, including contagion risks, fall in the latter camp. Stay tuned and informed, but it looks like war is coming. If the U.S. couldn’t stop Soviet invasions in Hungary and Czechoslovakia during the cold war, what are we thinking now?

:

Source: Financial Times

Source: NBC news

11. Technicals often get reversed, but this chart may be of note. Gold has been in a decade-long cup and handle pattern which usually breaks out higher with strong momentum. This may be important as the crypto “crowd” is rediscovering that crypto coins do not act like a currency. Like most risk assets, they are more closely correlated to equities in times of market strife, and when the chips are down, coins are backed by nothing tangible. NFTs are worse!

Source: Thechartstore.com from 1/21/22