Stock Market Weekly Summary

The big news today after the stock market closed was a major disappointment on Metaverse or Facebook earnings with an after-hours decline in the stock price of 20%. Spotify joined Meta in disappointing earnings and also dropped after hours. This is one day after Alphabet or Google reported blow-out earnings and moved the market higher in general today. Volatility continues on a daily basis as measured by the Volatility Index or VIX that uses options premiums as a measure of stock market volatility for 30 days going forward.

Here is a link to more information about the VIX https://www.investopedia.com/terms/v/vix.asp

With the VIX moving higher based on declines in market averages, the index has moved higher this year. Currently, at the close of trading, the VIX level is about 22. The peak this year was about 32 on 1/26/22. The highest value of the VIX was in 2008 at over 80. This was during the financial meltdown but did not occur on the market average low in March of 2009. During periods of calm in the markets the VIX can stabilize for long periods of time. As an indicator of performance, there is some correlation with the VIX making a short-term high and a short-term bottom in market averages. We do follow the VIX on big decline days but do not use it as an indicator to buy and sell stocks. However, if your goal is to buy low and sell high, the VIX is one tool to track.

To no one’s surprise, Omicron seems to be impacting employment as companies shed 301,000 jobs in January, the first time we have had negative job growth since December 2020. Jobs numbers for January will be reported Friday and those numbers will reflect Omicron. Markets are reassessing assumptions of economic recovery raised in 2021 leading to declines in stock prices, a bump up in interest rates. Importantly with respect to interest rates, a flattening shift in the yield curve from 6 months to 30 years with a small inversion in the later years. The bond market is not confident about economic growth going forward. The bond market is always more skeptical, concerned, and anxious about economic growth. Inflation seems to be less of a long-term concern to the bond market compared to overall economic growth, at least at this point.

A note on filing your income taxes for 2021. The IRS is, surprise, surprise short-staffed. Some statistics from 2020 report that there are 11.9 million unprocessed returns. Moreover, if you call the IRS for some assistance, they answered about 10% of the calls received. Our recommendation, especially if you are expecting a tax refund, is to file early. TD Ameritrade 1099 availability: we expect 1099s to be available online by February 17, 2022, by the IRS deadline. You may receive your form earlier.

Another note on government activity would be funding the government before they run out of money. This is the result of the kick the can down the road from the December deadline. Well, it’s here again in February so keep an eye on those negotiations as well.

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