Market Commentary — January 31, 2022

Large Cap indices moved into correction territory last week, down more than 10% from recent highs, but rallied back by the weekend. The Russell 2000 Index of small-cap stocks tested bear market territory, down nearly 20% off its November peak, but also rebounded.

The VIX, which measures market volatility, reached its highest level since the early months of the pandemic, closing the week just below the 28 level. Energy shares rallied on higher international oil prices above $90 a barrel due to rising tensions between Russia and Ukraine.

There are fears that the Fed is “behind the curve” and might have to take more rapid action on short-term rates to help curb inflation. Indeed, Fed Chair Jerome Powell left open the possibility the Fed might raise rates more than the three 25 bps hikes in 2022 they had signaled back in December, with the first increase coming in March.

Ironically, good news is bad news as the economy is growing at its fastest pace in nearly 40 years. The Commerce Department’s first estimate of economic growth in the fourth quarter showed GDP rising at an annualized rate of 6.9%, well above consensus estimates of roughly 5.5%. In 2021 as a whole, the economy grew by 5.7%, its fastest pace since 1984, the year I graduated high school and my savings account was paying 5%.

In ETF news, Fidelity has filed for ETFs tied to the Metaverse and Crypto and Digital Payments. Both ETFs will be sub-advised by Boston-based Geode Capital Management.

A formerly lifeless BlackRock ETF, the MSCI Kokusai ETF (TOK) got a mysterious $3.7 billion flow. It invests in Large and Mid Cap companies ex-Japan.

And apparently, ARKK’s performance woes are signaling the end of disruptive technology investing, because technology is no longer disruptive. I say this tongue in cheek because the proposition is ludicrous. While ARK’s big pandemic gains are getting a haircut in the short-term, over the long-term, the thesis remains intact.

Here’s to smoother market sailing this week!

Jane Edmondson
CEO and Co-Founder

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