Monday Morning Market Insights: Last Week in Review with Rusty Vanneman, Vol. 49

  • Happy Monday! I hope you had a great weekend and are ready for the holidays. If you’re on the road this week, safe travels.
  • The stock market will be closed all day on Friday in observation of Christmas Day, which falls on a Saturday this year. The U.S. bond market is also set to close early on Thursday at 2 p.m. ET and close entirely on Friday as well. 
  • Some early price weakness to start the week. Omicron cases continue to rise, but on the political front, Sen. Joe Manchin, a conservative Democrat from West Virginia, said Sunday he won’t support the Biden administration’s “Build Back Better” plan. Manchin’s decision will likely kill the $1.75 trillion social spending and climate policy bill as it stands now.
  • The overall US stock market lost nearly 2% last week. 
    • Options Expiration Week struck again. OpEx week has generally meant negative returns for the market this past year and last week was no exception.  
    •  Relative performance was a complete reversal from the week before: Value beat Growth, Small outperformed Large, and International outperformed Domestic.
    •  Diversifiers helped multi-asset portfolios last week, as the overall bond market was up slightly while real assets like commodities and real estate had slight losses.
  • Despite the losses last week, the overall US stock market is still up on the month (albeit less than 1%), with Value stocks outperforming Growth by over 7% this month.
  • The YTD return is now about 22% for the overall US stock market. It’s going to be tough, but there’s still a chance that a Santa rally into year-end might challenge the best year for the S&P (due to seasonals, sentiment, and technicals) since the late ‘90s. Calendar year returns for S&P 500.
  •  What is the Santa Claus Rally? According to the Stock Trader’s Almanac, it has meant historically positive stock market performance in the last five trading days of the year and the first two trading days of January.
  • Investor sentiment readings remain a plus for the stock market’s near-term potential. 
    • One example: The AAII Sentiment is at its 2nd lowest bullish level of the year. Low bullish readings historically precede above-average returns in the 1-, 3-, 6- and 12-month time frames.  
    • Also, Strategas’s Jason De Sena Trennert reports a key takeaway from their survey of over 500 institutional investors regarding their thoughts on 2022: “The good news is that investor expectations are not particularly ebullient, with nearly three-quarters of those responding expecting single-digit returns or less from stocks in 2022.” 
  •  It was an incredible year for the investment industry. ETFs might be at the top of the leaderboard for an amazing year of growth. According to Goldman Sachs, US ETFs have taken in nearly +$79B of net inflows in December so far (+10% from the monthly avg seen in 2021). YTD net inflows stand at +$868B, +75% from 2020’s prior record year of +$495B, and this is still with 9 more trading days in the year. On the back of global ETF inflows breaking $1T for the first time, global ETF AUM now stands at $9.5T (US $7T), more than double that of the industry in 2018.
  • The Fed is going to get tough on inflation. Interest rates, at least short-term rates, are likely to rise. Does that mean the bond is going to post negative returns next year? If history is any clue, don’t take that bet. The bond market still tends to generate positive nominal returns over 80% of the time when rates (either short or long-term) are rising. For more, check out the OPS Quarterly Reference Guide
  • Rising rates are typically a headwind on valuations, but earnings growth might be more than enough to offset it. 
  • Regarding outlooks, 2022 should be another positive year for globally diversified multi-asset portfolios. The key is to be diversified as there are headwinds, including US stock market valuations.  
    • For example, if one looks at the supposed “Warren Buffett’s favorite market indicator,” which is stock market capitalization divided by GDP, according to Ned Davis Research (NDR), the overall stock market is likely poised for negative returns in the year(s) ahead. Currently, this ratio is at a new all-time high. NDR looked at the most expensive quintile of this ratio going back to the 1920s. When the market is expensive by this measure, on average, the stock market generates a negative average return over the next 1-, 3-, 5-, 7-, 9- and 11 years.
    • Offsetting this concern though is that growth stocks are impacting the overall stock market valuations. For example, Tesla is trading at a trailing price-to-earnings ratio of 302 and pays no dividend. Amazon is trading at a trailing P/E of 67 and pays no dividends. Some growth stocks are super expensive!
  • Speaking of inflation, last week’s eye-popping economic number was the Producer Price Index (PPI). According to the BLS, “On an unadjusted basis, the final demand index rose 9.6 percent for the 12 months ended in November, the largest advance since 12-month data were first calculated in November 2010.”
  • Despite the inflation print last week, Ten Year Treasury Yields dropped 9 basis points over the week to 1.40%.
  • There are no reports on Monday and Tuesday (or Friday for the holiday, of course) for this week’s economic schedule, but Wednesday and Thursday are full, including another update of 3Q21 GDP. Expectations are 2.1%. That’s old news though.  
    • The current estimate for 4Q21 GDP, according to GDPNow, is 7.2%. 
    •  This all said, just this Monday morning Goldman Sachs cut its GDP forecast on the Manchin news, cutting its first-quarter 2022 forecast to 2% from 3%. The firm also lowered its second quarter and third quarter growth forecasts.
  • On Thursday, the Bureau of Economic Analysis will release its latest report on personal consumption expenditures (PCE).
    • PCE is expected to climb at a 0.6% month-over-month rate in November, according to consensus data compiled by Bloomberg, to mark an eleventh straight monthly increase.
    •  On a year-over-year basis, PCE is anticipated to increase 5.7% or the fastest clip since 1982. 
    • On a year-over-year basis, core PCE — the Fed’s preferred inflation gauge — is expected to accelerate to a 4.5% rate or the fastest since 1991. 
    • For a frame of reference, the headline Consumer Price Index (CPI) for November recently showed its fastest increase in consumer prices in 39 years.
    • And wholesale prices, as measured by the Producer Price Index (PPI), surged by the most on record last month at a 9.6% clip. 
  • Questions from advisors on potential investment strategies that can make tactical shifts in portfolio allocations, especially given the current backdrop of high equity valuations and low (but potentially rising) interest rates? Also, getting questions on strategies that try to hedge against inflation? Check out the Orion webinar from this past week which  features Howard Capital and PIMCO All Asset. The former is a highly rated tactical manager and the latter is a mutual fund sub-advised by Research Affiliates (RA).  Rob Arnott, who leads Research Affiliates, is known for its free and cool-to-play with  Asset Allocation Interactive website.
  •  For more Orion webinars, check out the Orion On-Demand Events page.
  • Crypto Corner – Grant Engelbart, CFA, CAIA, Sr. Portfolio Manager
    • Cryptocurrency prices were mixed last week (through Sunday night). Bitcoin fell close to 5% and Ethereum declined 2%. Some larger altcoins rose, such as Solana and Avalanche, rising 5% and 22%, respectively.
    • Bitcoin’s total mined supply reached 90% this week, however, the final 10% isn’t expected to be mined until sometime after 2140! Bitwise launched an NFT index fund this week – a trust product backed by non-fungible tokens (NFTs). Elon Musk tweeted that Tesla would offer some merchandise to be purchased via Dogecoin, sending the price up over 20% on Tuesday.
    • The SEC is delaying decisions on spot Bitcoin ETF proposals from Bitwise and Grayscale for 45 more days. It’s not likely that they will get approved, especially given the SEC just rejected proposals from VanEck and WisdomTree for “direct” Bitcoin ETFs. The SEC must also decide on the Kryptoin Bitcoin Trust ETF by Christmas Eve.
  • This coming week’s guest on Orion’s The Weighing Machine podcast is Jeremy Schwartz from WisdomTree. Jeremy works closely with Jeremy Siegel (a guest earlier this year on TWM). WisdomTree is always doing some innovative things and Jeremy Schwartz has been behind many of them. He has his own podcast too, called Behind The Markets
  • Our opening walk-up songs playlist from the Weighing Machine might still make 4 hours before year-end: The Weighing Machine Playlist! 
  • Awe-inspiring holiday photo: Lightscape at Brooklyn Botanic Gardens this year.
  • This past weekend I had 10 teenage boys in the house, and all of them went to the movie theater and came back saying that the latest Spider Man movie was off the chain awesome. In fact, the movie has the second biggest opening of all time. Who said movie theaters are passe? More top movie of the year lists are below!
  • Thanks for reading and have a great week!  For more resources, please check out the Financial Advisor Success Hub, and as always, please let us know what we can do better at or
  • Happy Holidays!


The CFA is a globally respected, graduate-level investment credential established in 1962 and awarded by CFA Institute — the largest global association of investment professionals. To learn more about the CFA charter, visit

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About Rusty Vanneman, CFA, CMT, BFA
Rusty Vanneman serves as the Chief Investment Strategist for Orion Advisor Solutions. An industry veteran with more than 30 years of investment experience, Rusty creates relevant market- and platform-related content that supports deeper, more engaging conversations with advisors and investors, educating key internal and external audiences on Orion Portfolio Solutions’ strategies and resources to help deliver favorable investor outcomes, and helps identify new investment offerings to meet growing marketplace demand.  Rusty is a host of Orion’s The Weighing Machine weekly podcast, Orion’s monthly Weighing the Risk podcast, and authored the book “Higher Calling: A Guide to Helping Investors Achieve Their Goals.” Rusty has managed multiple mutual funds and hedge funds during his career and was named one of the Top 10 Portfolio Managers to Watch by Money Management Executive.* Prior to Orion’s acquisition of Brinker Capital in 2020, Rusty was the Chief Investment Officer for Orion Advisor Solutions and prior to that was the President and Chief Investment Officer of CLS Investments.  Before joining Orion in 2012, Rusty served as the Chief Investment Officer and Managing Director for a multi-billion-dollar registered investment advisor (Kobren Insight Management) in the greater Boston area. His 11-year tenure at the RIA included a five-year span when the firm was owned by E*TRADE Financial where he also served as the Senior Market Strategist for E*TRADE Capital. Prior, Rusty was a Senior Analyst at Fidelity Management and Research (FMR Co) in Boston. Additional work experience includes Thomson Reuters, General Electric, and as a cattle ranch hand in the Nebraska Sand Hills. Rusty received his Bachelor of Science in Management from Babson College in Wellesley, Massachusetts, where he graduated with high distinction. He holds the Chartered Financial Analyst (CFA®) designation and is a member of the CFA Institute. He is also a Chartered Market Technician® (CMT) and is a member of the Market Technician’s Association (MTA). He is also a Behavioral Financial Advisor (BFA). *RUSTY VANNEMAN MONEY MANAGEMENT EXECUTIVE AWARD. Rusty Vanneman, CFA, CMT, was selected as a “Top 10 Fund Managers to Watch” in 2017 by Money Management Executive. Money Management Executive is an unbiased, third-party publication covering the asset management industry. Money Management Executive chose the list of managers to watch by screening Morningstar data from funds with a single manager, ranked as having the best three-year annualized returns in their respective categories. The list of managers was published March 27, 2017. Money Management Executive is not affiliated with OPS. Ratings and awards may not be representative of any one client’s experience and are not indicative of OPS’s future performance.