November was a strong month for the economy. But in terms of medical news and
financial markets? It was tough First, the Fed announced its plans to start tightening monetary policy. Then a new type of COVID-19 emerged. By the end of the month, the combined news had sent markets down from mid-month gains to much more mixed results.
Let’s take a look back to help determine what the next month has in store.
Mixed news in November
Market data is mixed. Here in the US, NASDAQ
Medical risk theory. Looking first at the positive news, November came with signs that the winter delta wave may be slowing. The data showed that both case growth and positive test rates in the United States have remained modest by recent standards. The announcement of the Omicron variant raised concerns about further case growth in December, but that risk is far from over. So, despite the headlines and concerns surrounding the novel coronavirus variant, we know very little about it. For now, the risks are still largely theoretical. Given that, we definitely need to keep an eye on the medical risks – they are real. But it’s not something to be overly concerned about just yet.
Strong economic data. What if we saw an omicron wave? Having survived two delta waves, the economy has become more resilient, so any economic damage is likely to be limiting. For example, economic data continued to improve in November. Employment for the month of October was good, and the employment report included a significant upward revision to the September numbers. As a result, job growth has remained robust and layoffs have fallen to pre-pandemic levels.
Consumer spending also continued to grow in November, despite the delta wave. Likewise, while rising inflation and policy risks remain a concern, last month’s data showed signs that those risks may have peaked. Looking forward to December, the news is good too. The ADP jobs report came out strong, and the current spending data continued to improve. So, while the economic risks remain, it appears that they are heading down rather than up.
December big picture
Markets show stability. After concerns about the new Omicron variant eased and interest rates increased, markets began December with a flat. Although risks persist, continued hiring and spending should support expected earnings growth. In fact, higher rates have usually been associated with strong market performance. However, the possibility of further volatility in the market is real. Based on economic fundamentals, December could see markets stabilize near all-time highs, despite a slight pullback.
potential medical risks. Looking at the big picture for December, the real risks are not economic, but medical (maybe) and politics and politics (sure). The medical risks that come from the Omicron variant may be much worse than what we can see now. However, we know that medical risks can be contained. We’ll have to wait and see what happens.
Political and policy risks. The more certain risks are politics and politics, starting with the confrontation over the debt ceiling. This scenario will continue into December, with the real possibility of another government shutdown. We’ve seen this movie before, but it’s possible to find some kind of resolution before a shutdown becomes necessary. However, the uncertainty generated by the situation is likely to negatively affect the markets and the pace of the economic recovery in December.
In terms of monetary policy, the Fed’s decision to start tightening its programs will also begin to factor in. The policy changes over months, but now headwinds, will expire in December. The plan to tighten policy is a good sign, in that it means that the Fed sees the economy as healthy. However, the prospect of an acceleration of tightening – or even comment on the matter by Fed members during December – could cause more market volatility by the end of the year.
Politics and political risks
In short, the medical advances we’ve made in the past months, including November, may be in jeopardy. So far, though, we don’t see signs of a reversal of medical improvements in December. The economic progress we have seen is likely to continue. There are still risks to the markets, but December is also likely to be positive on this front. The real risks come from outside the economy in the form of politics. While the uncertainty here may be substantial this month, the fundamentals are still strong so far.
November was a mixed month in many ways. In December, we have the potential for some mixed news, which largely depends on political risks. But based on what we know now, the medical and economic news is more likely to be positive than negative. The current environment must mitigate any impact from political risks.