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It’s Tapering Time

December 16, 2021

With December now upon us, and as the year begins to draw to a close, the relentless upward trend for the year has seemed to run out of steam, or at least was ready for a breather.  The S&P 500 total return for the month was -0.7%, the NASDAQ Composite Index was slightly positive at 0.34%, the major indices showing the most deterioration were the Dow Jones Industrial Index -3.5% and the worst for the month the Russell 2000 Index ended November with a total return of -4.19%.  Likely contributing to this market action was the Federal Reserve which announced a change in policy which amounts to a beginning of the taper or reduction in monthly asset purchases:

"The [Federal Reserve] Committee decided to begin reducing the monthly pace of its net asset purchases by $10 billion for Treasury securities and $5 billion for agency mortgage-backed securities. Beginning later this month [November], the Committee will increase its holdings of Treasury securities by at least $70 billion per month and of agency mortgage‑backed securities by at least $35 billion per month. Beginning in December, the Committee will increase its holdings of Treasury securities by at least $60 billion per month and of agency mortgage-backed securities by at least $30 billion per month. The Committee judges that similar reductions in the pace of net asset purchases will likely be appropriate each month."1

Days after the decision was made public most of these indices peaked for the month, from the 8th of November to month-end the S&P 500, Nadaq Composite, Dow Jones Industrial and Russell 2000 were down -2.75%, -2.72%, -5.13%, and -9.91% respectively.  Also near the end of the month the World Health Organization [WHO] named the Omicron Variant of SARS-COV2 as a new variant of concern.2  With these headwinds into December and the end of the year we will be carefully watching to see where we go from here.  We hope everyone has a wonderful December, Happy Holidays, and have a wonderful New Year as we move into 2022!

Rob Dailey
Portfolio Management Analyst

1https://www.federalreserve.gov/newsevents/pressreleases/monetary20211103a.htm
  Published November 3, 20201; Accessed December 15, 2021

2https://www.who.int/news/item/28-11-2021-update-on-omicron#:~:text=On%2026%20November%202021%2C%20WHO,Evolution%20
 Published November 28, 2021; Accessed December 15, 2021

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange.

The S&P 500 Index is the Standard & Poor’s Composite Index of 500 stocks and is a widely recognized, unmanaged index of common stock prices.

The NASDAQ Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market and it is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies.

The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.

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