Last week's commentary centered on the divergence between large-caps and small-caps. Basically, large caps were trending sideways, while small caps and growth stocks were moving lower, and we speculated on how the divergence would resolve. Well, it quickly became clear that large-caps were going to join the party as we mostly moved lower other than a few hours following the Fed meeting which saw a huge spike higher. These gains quickly eroded away. This morning, we gapped down to make new lows in tech/small-caps/growth, while the S&P 500 (SPY) made a slightly lower high. Today's commentary will focus on the market's next move and discuss some adjustments to our strategy given the market's bearish price action. Read on below to find out more….(Please enjoy this updated version of my weekly commentary published December 20th, 2021 from the POWR Growth newsletter).
Last week, the S&P 500 ended in consolidation while the Russell 2000 was trending lower. After a brief spurt higher following the FOMC, the S&P 500 also joined the bear party and moved lower. Currently, it’s about 1.5% above its lows from early December, while the Russell 2000 tested these levels today.
The trigger for today’s move lower was Senator Joe Manchin of West Virginia saying he is a No on the BBB bill. I do think this slightly lowers growth expectations given the bill’s $2 trillion size and consensus that it would be passed.