Omicron Is Here: What That Means for Market Recovery

Ryan (00:00):

Jeff. We are back. We had a well-deserved Thanksgiving break. We will talk more about what we ate for Thanksgiving here in a minute or two. But I think this whole supply chain thing, Jeff, has just gotten real as the kids say. Did you see that in Canada, they have a maple syrup shortage and Canada owns like more maple syrup than anybody in the world. And they're releasing, I think it's like 50 hope I get this number, right? It's like 50 million gallons of syrup because of the supply chain. Have you had any trouble getting syrup lately?

Jeff (00:40):

We're not a big syrup family. Uh, so we, we frankly wouldn't notice that one. That is disturbing. I mean, I thought the craziest thing going on now is that dollar stores are charging a dollar and a quarter. If Five Below changes their name to Six Below, then we know we really got problems, but, , clearly, supply chain inflation issues  are still with us. And unfortunately they're going to be with us a little bit longer.

Ryan (01:07):

Well, I mean, we've been saying that for a while, but I feel like that's the case. They are not going anywhere. And you know along the lines of supply chain, one of the big things that happened,  back, I guess before Thanksgiving was the U.S.is going to release , 50 million barrels of oil as well. There's that 50 and 50 with the, with the syrup and the, and the oil release. I do have one question though, Jeff, so clearly the way you just said it in the way I said it, the word syrup. Now I grew up in Ohio, as I've mentioned once or twice, and you're a Kansas city guy. We were just talking about barbecue. Literally we, before we started recording, , you pronounce a serum. I moved down to South Carolina. You know how they pronounce it down here, “sirrup”. There you go, “sirrup”.

Ryan (01:50):

And I say, cause I'm like, wait, what? In Rome, I say “sirrip” and my, my wife and kids get so mad at me. I'm like, Hey, pass the “sirrup”. And I know it's probably just do it to make them mad, but you know, it's kind of like, what people call things where you live. And it's just what it is down here in, in South Carolina. So Jeff let let's get right to it again. Welcome back everybody. We did take a week off here for the Thanksgiving holiday. We are glad to be back at the latest LPL Market Signals podcast. We'll see if we remember how to do this after a week away, we’ll knock off the dust, I should say right now. First things first, we have a new variant, right? Omicron We are going to discuss that and the potential the fallout that could come from it.

Ryan (02:31):

And also what it could mean for the economic recovery. It was on really good footing just about a week ago. What all that could mean. We're also going to talk a little bit about December seasonality, right? You've all heard probably about the Santa Claus rally. Historically December is a pretty strong month for stocks, but we've had a really good year of nearly 24% or so for the year, the time we're recording this on Tuesday mornings, it's a good year. Will Santa come once again? Or will the new variant knock him off or is there something else there? So we'll have a little fun discussion there. And then we're going to finish things with,  something we talk about every week it feels like, Jerome Powell, he's sticking around another four years, which is what we expected when we gave our percentages there.

Ryan (03:11):

And Jeff and I both favored the likely reappointment of Jerome Powell. He indeed will be in charge of the Fed for more years. So we're going to talk about those three things today in today's podcast, but Jeff, we're going to turn it to you cause I've talked long enough here. Clearly everything was going great. Wednesday markets start with new all-time highs and then bang Friday. I was actually going to be on CNBC on Friday. They asked me like two weeks in advance. Right. And I looked and I was like, well, I was going to take that Friday off. It's  Black Friday, right? It's a half day it's after, you know, oh, well nothing's going to go on. I said, can I do it from home? They said, sure. I threw a tie on, I'm going to sit the chair and say a couple of words and get out of there and start my, you know, or continue my Thanksgiving break.

Ryan (03:49):

And then I wake up at six in the morning and look at futures and I'm like, oh, this isn't going to be your average, CNBC hit.  I had to actually get ready to talk about something because the market was getting destroyed Friday morning. Fortunately bounced back on Monday at the time of recording as futures are lower. Again on Tuesday, Jeff, let's talk about Omicron, I'll just turn it over to you and you can talk for a few minutes on kind of your thoughts it's very early, but how you think it's going to impact the stocks, economy, what it all means. And I'll kind of chime in as well. Take it away, Jeff.

Jeff (04:17):

Yeah. We have more questions and answers right now. If this thing  is more transmissible,  than the Delta and, , certainly causes potentially we don't know yet, but causes severe illness this is going to impact,, economic activity, you know, set aside , the unfortunate human costs. It’s going to have some economic impact, right? We've already seen travel restrictions in a number of countries, right. And in particular, out of the Southern part of Africa, but, you know, some countries, Israel among them, have shut off travel from all international travel. So, you know, those sorts of things cause economic impact. The market is rightly concerned. Uh, but you know, it's probably going to be a few more weeks before we really have a good handle on just how severe the illness is, whether it's impacting,  just the unvaccinated,  or not, you know, how it impacts people of all ages.

Jeff (05:22):

Right. I think that the cases, thus far have  skewed younger, that we've seen, and then the vaccine makers don't really know how effective their, you know, the vaccines and the oral treatments, uh, in particular from Pfizer are going to be just yet, uh, against this variant. So, you know, markets, don't like uncertainty, we're going to have to wait a few weeks to get a decent handle on what we're, we're looking at. A little bit of volatility makes sense here. I think though, there's reason to be reassured given we have a playbook, right? We know what we're going to do. There's, there's certainly reason to believe that, you know, if the vaccines need to be, um, you know, reformulated in a few months, that they'll be able to do that successfully. And then politically,  at least in this country, there's just not a lot of tolerance for another lockdown. So we don't think that's going to happen. Certainly Biden agrees with that. So economic impact, probably going to be modest based on both, you know, most realistic scenarios here. Uh, but it's really just too, too early to tell at this point Ryan (06:29):

No, I agree. Great, great summary there of kind of what we've seen. I've got some notes here in front of me that you mentioned word political. So it's based on, I believe that the Greek alphabet, right, and the next letter was supposed to be “Nu.” And they said, well, we can't call it “Nu” the new variant because that will confuse everybody. Cause it's not really well, I guess it's new. And we've had some variants. That would just confuse people. The other one was “Xi”, which is obviously the name of the president in China. So we can't call it that. That's how we landed on Omicron, the next letter in the alphabet, we did some skips there, but, mentioning  kind of what other, um, experts in the field are saying, you know, Moderna, might've heard of that company that literally, you could say, saved the world in a way with how quickly they created the vaccines for COVID-19.

Ryan (07:14):

And obviously it's worked on Delta and two of the other variants that we've seen over the past four, I guess we'll call it past year, approximately. I believe, um, here's straight from a CEO. He made the comments and these are, if he made it to the Financial Times and , we saw these comments Tuesday morning, he was all over the news. I'm going to sound smart for a second. I have no idea what I'm actually saying though. He said, there's 32 of 50 mutations in the Omicron variant. And that are on the protein spike and such high mutations weren't expected for one or two years. Again, I have no idea what I just said that’s someone way smarter than me, but he said, we're seeing things we didn't expect to see for one or two years, these mutations. And that's the big worry that's out there that we don't know yet. You nailed nail on the head, right. Or the hammer. I don't know. How's that expression go? Jeff, you nailed the hammer on the head of the nail that the, we don't really know exactly what's going to what's that

Jeff (08:12):

Close enough.

Ryan (08:13):

I butchered it. I, you know what? We took a week off, right? I mean, we took a week off, I'm just still, I'm not a hundred percent, by the way, I may be on a new expert. Talk about this. I did get COVID right. I mean, I got COVID about two weeks ago, right ahead of Thanksgiving. I felt bad for half a day, a week for a couple of days, not weeks wrong word. I'm already weak, tired for a couple of days. My son got it, like six kids out of19. Got it. And who knows? I'm fully vaccinated. I actually had the booster. Right. So, I mean, I got one of the variants. I have no idea. not a doctor. It, wasn't great. But, um, I did get it. So I'm not saying I stayed at the Holiday Inn Express last night, but I will say fortunately  for myself and my son who got it, somehow my wife and kids, my wife and daughter, and other son didn't get it. But, you know, weird stuff, but I'm feeling good now. But, um, you know, with this Omicron, we just don't know exactly kind of the fallout and the uncertainty that it brings. And I mean, Jeff, remind me, markets don't like uncertainty, do they?

Jeff (09:07):

Oh, they, they definitely do not. Uh, you know, thankfully we'll know a lot more in the next, uh, two, three weeks.

Ryan (09:15):

Yeah. I mean, Jeff, I don't really have too many more comments because, I mean, who knows by the time we listen to this, we could have some major new news on this variant. Do you have any final comments? And if not, we can kind of move forward in our discussion or, well, no, you know what? We're going to move forward to the economy. That's the next step in this? Um, you know, Jeff, we had some, a bunch, it just feels like, uh, a year ago. But last Wednesday before Thanksgiving, we had a bunch of economic data that came out and the majority of it was actually really, really strong. And I'm just going to read a couple of highlights if I can find it. And I'm going to ask you Jeff, kind of, if you think this can knock kind of the economic recovery that we have going on, third quarter GDP came in at 2.1%, a little bit better than expected, expected at 2%.

Ryan (09:58):

That's backward looking, we're aware, but still better than expected, uh, core capital goods. And on the YouTube channel, we are sharing like kind of one of our favorite economic indicators. It's the new orders for non-defense capital, uh, goods extending or excluding aircraft's it's up like 20% above pre COVID levels. That's CapEx, that's a companies are out there investing in themselves to invest in their future. If you're uncertain about something, you might not be making major investments in capital expenditures. We're seeing that. So that was a positive sign, durable goods. They come in a little bit weaker than expected. Next transports was, it was a little better than expected.  Initial claims, this was a wild one. Initial claims came in at 199,000. That was expected to be at about 260,000. Now they've got a huge, huge miss. And it was, there was some, you know, different, different reasons for that bottom line. That's a new low number. Remember we had a 6 million initial claims back in the midst of the pandemic. So there are some real positive things on the economy, Jeff. , last Wednesday, then we all went and had Turkey on Thursday, got fat. We're going to talk real soon what we ate for Thanksgiving. And then Friday happened, how much do you think Jeff it can slow down this economic recovery? It looked like it was starting to turn a corner.

Jeff (11:08):

Well, and probably not much, but you got to put a big asterisk next to that, right? Uh, cause  we really need more information again, to have much, much confidence in that. But if you just want to take Delta as a base case, and it's probably going to be at least my opinion a little bit better than Delta, because we're a little bit better prepared now than we were a few months ago, uh, you know, more vaccinations and certainly, more treatments. So,  if you take that as a base case, maybe it's a couple points off a GDP in a quarter. And then, you know, we get most of that back the next quarter. So that's not so bad. You know, one forecast I saw from an economist that, that I respect was a global GDP impact of 0.3% for the year. That's not  that big of a deal.

Jeff (12:01):

We can absorb that. So, you know, again, we have a playbook, we have a lot of tools. Uh, we know how people are going to respond if it's anything like Delta. So when you look forward, you know, the reopening, the last leg of the reopening is going to happen. Hopefully it's going to happen in a couple of months, if not sooner, but you know, if it gets pushed off a little bit more, that's certainly not enough to derail the markets. And you know, if GDP grows in the U.S. at, you know, 3.8 instead of 4.1 next year or something like that, it's not a disaster,

Ryan (12:33):

Right? No, exactly. I remember six months ago or so we were saying, Hey, third quarter could see like eight, 10% GDP growth. Third quarter came in at 2% or 2.1%. Like I just mentioned, it's the fourth quarter now though, like we're expected pretty solid growth in the fourth quarter, you know, the Atlanta Fed GDP tracker, they've got a formula that they plug in all the data pieces. I think they were flirting with 8% GDP growth or so in the fourth quarter at that price on a high side. And maybe again, some things get pushed back because of, of the new variant. Um, but, but still likely the solid growth is coming. I mean, Jeff, you mentioned Delta. I changed gears for a second. I did watch that new South Park and South Park fans out there where they go 40 years in the future and still dealing with the pandemic and they called it like the Delta frequent flyer miles plus variant or something.

Ryan (13:21):

And if you guys saw it, you know what I'm talking about. It was pretty funny. Hi, Jeff, we're going to wait when I start talking to South Park, it's time to move forward. But I mean, the truth is the economy is still really strong. We could see a little slow down, believe me, we're going to be watching this extremely closely. Um, but the economy still looks pretty solid to us. And by the way, Jeff, remind me, there’s a lot of things next week? What happens next Tuesday, by the way, speaking of the future,

Jeff (13:43):

What happens next Tuesday? Well, we're releasing our 2022 Outlook,

Ryan (13:49):

Please. Don't please. Don't forget Jeff, please. Don't forget this one. Yeah. Tell us about the Outlook.  Not about it, but just how excited you are that, you know, we'll talk about that next podcast.

Jeff (13:57):

Yes. Really excited about that one. Uh it's um, you know, one of my favorite days of the year to be a part of this team at LPL Research, uh, we as a team effort, certainly with the designers, creative folks, uh,  and our team, I feel like we have the easy part just write in the text. Right. And then the communications folks do a great job of coming up with a theme and, uh, you know, really making it pretty. So really excited about bringing that to you,  in a week. And we, we,  we hope you all, like it it'll be available on lpl.com.

Ryan (14:29):

Absolutely. We're going to promote it a lot more next week, but we are releasing our 2022 Outlook next week. And Jeff and I will dive into that exclusively on the podcast next week. So Jeff, that brings us to Wednesday, the, economy, we look good Thursday. We ate a bunch of food and then Friday. So let's, we talked about Friday, right. And we talked about Wednesday, let's talk about Thursday. How much food did you eat, Jeff? And what did the,  Buchbinder family do on Thanksgiving?

Jeff (14:56):

Yeah,  we focused on the sweets. We  normally  do Thanksgiving with my in-laws they're local here in the Boston area, but they were traveling and we decided not to. So we did a very low key thing. You know, we didn't make a 15 pound turkey or anything like that. Uh, but what we're really good at is, is desserts. Right? And so, you know, we had, um, you know, basically every treat, we could find at our local grocery store it ended up in our house and, and in our bellies, , it was delicious, no pies, but,  you know, lots of cookies and cakes and brownies and things like that. It was, it was delicious.

Ryan (15:39):

Well, this is why we diversify as a research department because we have pies down here and not so many of the other sweets. We had a pumpkin pie, like a chocolate pumpkin pie. Oh, my wife made her grandma's world famous apple pie. That was really, really good. She made it a year ago. And it was just, I don't know if she'll admit this too. Should that just kind of off whatever she did this year, it was a lot better. Actually. I know what she did last year. She bought a pre-made crusts in the store and she claimed the pre-made crust was the reason it wasn't good. So, okay. Well, okay. So she made her own crust this year and the pie was really good. We did the turkey and all the regular stuff. Um, because Sebastian had COVID, then he gave me COVID, my wife's family was supposed to come down and some of them are supposed to come down and visit us for Thanksgiving, that did not happen.

Ryan (16:25):

So, uh, thank you to COVID. No, I don't mean it like that. I'm being sarcastic. I wanted them to come down and I don’t mean to be, thank you, they aren’t coming. We wish they could have come. My kids are really sad. Their cousin's supposed to come just, and one of the things we all have to give up because of  the world we're living in. But fortunately, again, we're all healthy now, which is good, but we just had a, so much smaller Thanksgiving with , with my immediate family. And, um, now best Sebastian and I are out of COVID jail as I called it. And we're, we're moving, moving forward. But yeah, it was an awesome Thanksgiving for us as well. Jeff, I'm glad you guys had a bunch of sweets. We had the pies on that side and a bunch of food.

Ryan (16:57):

Now, Jeff, before we started talking, I mentioned tomorrow, I'm traveling a little bit in North Carolina.  I'm going to explore Lexington North Carolina, which is very, very famous for all you podcast listeners. And as part of the world, Lexington, North Carolina has extremely famous for its barbecue. It has a lot of vinegar on it. I wasn't a vinegar fan, but now I live in this part of the world and I'm getting used to it. So Lexington, North Carolina, I'm coming to see you tomorrow. Jeff, tell me the difference between Kansas city barbecue. And let's say,  Carolina, barbecue.

Jeff (17:26):

Yeah. Kansas City barbecue is, more molasses based than vinegar based. I think that's the biggest difference. And there’s, I think there's a little more of a smoky flavor to it. It's a little more like Texas style, which I'm sure many people are familiar with.  I'm not sure how long it takes to, to cook the vinegar based barbecue i in the Carolinas, but it takes a full day to do Kansas City or Texas barbecue. Right?

Ryan (17:54):

Yeah. Well, I'm not sure how long does either, but I can answer this much takes about five minutes to eat it. I don't care where it's from. It takes me five minutes and I'm done. So that's how I know that answer. Alright Jeff, let's go forward. Um, so good discussion there on Omicron. Believe me guys, we're going to be talking about this a lot more. I have a feeling going forward, so we're not done with this conversation. I wish we were, but we're not. Um, so Santa Claus rally Jeff is, as you know, and our listeners probably, I know, you know, this listeners might know historically January, I'm sorry, January, I'm going into the future. I meant to say December, December historically is one of the better months of the year, 1.5%t on average that comes in third, only November and April are better hire about three quarters of the time though.

Ryan (18:35):

No month is more likely to be higher than December. Um, and one more, I just kind of remembered that honestly, this morning, as I get ready for the podcast, we all for awhile, we said, ah, December has never been the worst month of the year, then 2018 happened. And so only once in history has December been the worst month of the year and only three other times, has it been the second worst month of the year. The worst month this year was a 4.8% drop in September. So, you know, we can't make guarantees or promises here, but we are saying history would say, you know, probably are going to see a 4.8% drop this December. Omicron is out there so anything is possible obviously. Um, but Jeff, tell me a little bit about what you're thinking this December. I mean, there are, there is that uncertainty, can we buck the trend of Omicron and just kind of have a little bit of an upward bias the rest of this year?

Jeff (19:24):

Well, that's probably more likely than not, uh, again, I mean, it's, it's such a tough thing to predict, right? We will have some time left in December after we get more information on, I mean, just what we're dealing with, right. Again, sort of the two to three week timeframe,  after, in particular, Moderna and Pfizer, Kimberly, uh, study this thing more closely, uh, and figure out just how effective the treatments are and we can see what the symptoms are. I mean, remember if, if this is just like what we've seen before, um, you know, hopefully a lot of people have your experience, Ryan, where they, you know, they don't feel so great for, you know, a day and then they're back on their feet and good to go. Uh, that may be most of what this, this looks like in which case we won't need restrictions. So, you know, if we get a good news in the next two, three weeks, then sure. A late year rally makes a lot of sense. You typically have less selling pressure late in the year, you know, once the holiday start, um, you know, in particular people that want to take a taxable gains, uh, at the very end of the year. So, um, that just natural lift, uh, could certainly push us a little bit higher and, um, you know, could end up maybe with what north of 25% return for the year, which would be tremendous.

Ryan (20:47):

It absolutely would. And you mentioned the future. Um, I always remember the Yogi Berra joke. I think we made a comment about Yogi Berra in a team meeting yesterday and he gets all these quotes, the Yogi Berra quote -  “It's tough to make predictions, especially about the future.” It's just, yeah, it's a good one. I like that one anyway. Okay. That's a good one. So let's go ahead and make a prediction anyway, whatever. Um, so when you up at least 20% for the year, Jeff and we are showing this one now on the YouTube channel. Once again, and then we don't know, you know, we're probably going to have 20% for the year heading into December with one day to go in November and it is possible. It could have a massive sell off, not likely, um, you know, at 24% for the year give or take.

Ryan (21:27):

Um, so if you're up 20% for the year heading into the normally bullish month of December, the average return is actually a little bit better of 1.7% on average versus one and a half percent on average. Um, and again, I think it's 1, 2, 3, 4, 5, 6, 7, 8, 9, 8 of the last nine years when you're up 20% for the year heading into December, you're actually higher in December after a really good start. I mean, Jeff, you know, when I get  our friends in the media, they ask us, they'll say, why, why? And I'm always kinda like, well, it's a bull market. Usually market stocks go up in a bull market. I mean, good years usually kind of keep going up. Do you think it's cause portfolios, chase managers, chase. I mean, people underexposed, why, I'm not even talking about 2020, well, here we had 2021, I'm talking about the future. Why is it normally you get an even stronger performance with a good start of the year. Do you think it is because portfolio managers chase?

Jeff (22:20):

Well, it's not just portfolio managers. It's, it's all of us, right? I mean, this is just a market of performance chasers. And so, um, you know, if you're, you know, if your neighbor is making money, you want to make money. That's, that's part of it. But, you know, maybe just as big of a part of it is, like you said, if you're in a bull market and you know, the economy is growing and earnings are growing, then, you know, stocks are very likely to go higher. Um, you know, looking forward to next year. I mean, you're up double digits if you're not near a recession. Right. And so, you know, people I think are, you know, getting, getting smart about that. People know stocks go up a lot more than they go down. And if it doesn't look like you're going to have a recession, then, um, you know, there's certainly, uh, more reasons to buy rather than sell. So, um, you know, momentum begets momentum. I know people who follow the charts and use technical analysis say that all the time, right? So, um, you know, gains certainly lead to more gains has people have that bullish expectations.

Ryan (23:21):

Uh, absolutely. If you follow this podcast for a while, which hopefully you have, and if you're new, welcome to our podcast, um, you know, we were sharing literally like 20 days off the lows and March 2020, 20 days off those lows. I forget the exact numbers I'm going to paraphrase, but like it was one of the best 20 day rallies ever. And then I broke the numbers down and said, wow, you have three months, six months, 12 months later, you have historically extremely strong gains. Guys a year ago right now we are wrapping up one of the greatest months of the history of the stock market last November, right? We had a sell up into the election. The election happened. Election came in a little bit closer than people thought when it came to the way the Senate and the house are broken down, gridlock can be good sometimes.

Ryan (23:58):

Oh, and by the way, that's a major breakthroughs in the coronavirus with vaccines that kicked off an enormous, huge rally, last November. I remember talking about this exactly a year ago right now. Everyone said oh my goodness, we just had a big November. It's gotta be bearish, got to go down. We shared on this podcast, no, the historical returns after enormously large gains are not the end of a bull market. They're not the middle of a bull market. They are   the kickoff to a new bull market. Here we are a year later with extremely strong returns. Um, so again, when you put all this stuff together with the economy, with what history has told us with the technicals and fundamentals and all, yeah, a little bit of Fed backstop, also tailwinds, baby, all those things led to that strong, strong, historically strong bull market we've seen this year. And fortunately at LPL Research

Ryan (24:40):

we've been kind of riding that and explaining it to everyone. It's been a lot of fun. And if you want to help us with this podcast, please give us a, like, give us a follow, give us a positive review. It goes a long way. And uh, we hit over 500,000 downloads just a week or so ago. Um, so that's something that we are about that about two or three weeks ago, but, um, something we're really, really proud of. So Jeff, the final thing we're going to talk about is Jerome Powell and he, oh my goodness. I got so excited I bumped into my screen. And my monitor started bouncing around. Jerome Powell is back for four more years. If you're looking on the YouTube channel, I've got a fun playful. If you remember the “Wolf of Wall Street where he says, “I'm not going anywhere”. I'm not going anywhere.

Ryan (25:17):

I can't use a, the word he uses when he, when he, when he says it. Cause that I think, I think they used the F word in, the “Wolf of Wall Street” more than any , I think any other movie in the history of mankind, but still kind of funny movie. Anyway, I've got Jerome Powell’s face on Leo there saying he's not going anywhere. We've got four more years of Jerome Powell, kind of what we expected Jeff, this, I don't know we was conversational though, cause we kind of expected it. But um, what do you think, uh, maybe, you know what, let's go a different route. He's here for four more years, we kind of know what he's doing. Do you think he's talking today? Do you think Omicron could kind of shift some of the things that Jerome Powell has been telling us? Um, you know, specifically, Hey, maybe, maybe they don't take her so fast. Maybe, you know, three rate hikes next year sounds ridiculous. Like some, some people were saying just this time a week ago, what's your take on what he might say and maybe what the next four years to bring?

Jeff (26:03):

Well first thanks for, uh, keeping the language clean, um,

Ryan (26:08):

The F word is Fibonacci by the way that's the F word, Fibonacci or if you're talking to the fundamental crowd, the F word is fundamentals. That's an old joke. I've used it many times, but yeah. That's the F word depending on who you're speaking with.

Jeff (26:18):

Yeah. Yes. I think, uh, I think it's clear which of us is the fundamental guy in, which is the Fibonacci guy. So, um, you know, here it is, again, you know, Omicron creates uncertainty. The Fed will talk about that. Powell will. talk about that today, no doubt. Uh, you know, I'm not our chief Fed watcher, that's Lawrence Gillum, our fixed income strategist, but I'll say, um, I personally think three rate hikes next year is way too aggressive. Um, even before Omicron, you know, one or two, maybe, at the end of the year, made sense to me, uh, you know, they got to get done with the tapering of the bond purchases first. Right. And even if they might, they could accelerate that, um, and end it in, I don't know, late spring or early summer possibly, but then I think they're going to want some spacing between the end of the bond purchases and the start of rate hikes.

Jeff (27:16):

Right. So, you know, I think three was just too aggressive.  Now I think you're going to see a lot of folks push that out, you know, and, and maybe say only one next year, that's more where we are. Right. Uh, because of this, you know, even if we get a good scenario with Omicron, it's still very likely to slow the Fed down. Right. Um, and um, you know, it reduces the chances that the tapering gets accelerated. So, you know, we think one rate hike next year late is, is a reasonable expectation. And if  Omicron is worse than anticipated, maybe you end up with just the start of rate hikes in early 2023.

Ryan (27:55):

You mentioned kind of maybe one rate hikes where we are, it's where we've been. Right. I mean, just a week ago, last Wednesday's big shops were saying, oh, maybe three with a middle of the year likely. And some different shops were saying, I think March for rate hike, I was on, um, with Maria Bartiromo last week. I forget the day, doesn't really matter, but I was talking to Maria and she asked me the question. So do you think the Fed's going to hike rates early next year or middle of next year? And I kind of froze for a second. And I was like, neither, we think it's going to be later next year. I said that before all this Omicron stuff. Because it was like, so just obvious to everyone, apparently, that the Fed was going to hike rates sometime in the middle of the year or maybe even earlier, the idea that it could be later was just like, not even fathomable.

Ryan (28:36):

And now here we are just literally a few hours later if you think about it and Omicron has kind of changed this, but again, that's what LPL Research was saying. And like you said, Lawrence, he's been talking extensively with our nearly 20,000 advisors. Um, he probably did it just this morning. Today's Tuesday. We have a fixed income Tuesday call with our advisors. He's been saying something very similar to that. We're not buying here what everybody else is selling and we'll see, you know, a long way to go, don't get me wrong, but we'll stay in a little bit, uh, potentially more dovish, um, camp, still a rate hike probably next year, but it's going to be a little bit later, but Hey, you know what, we'll talk more about that next week in our 2022 outlook, Jeff. Um, the final thing, I guess I want to point out is it is a week with some things happening. What should investors and our listeners be paying attention to this week?

Jeff (29:21):

Sure. Uh, I think the jobs report is the big data point of the week and it's pretty much every jobs support is a big report in whatever week we get it, uh, probably see, you know, half a million jobs, you know, maybe a little bit more than that depending. Uh, but you know, we know we have, uh, you know, uh, COVID, uh, drag that continues not just Omicron now, but while  Omicron emerged after the reporting period, but we had, you know, COVID concerns with Delta in Europe still. Uh, and that was certainly having some impact on growth. So, you know, maybe you get a little bit of upside to that, but, um, you know, the labor supply issue wasn't fixed, right? There's just a lot of people, maybe we made some progress, but it wasn't fixed. Supply chain problems aren't fixed. Uh, that's still going to present a drag. We should be seeing a million jobs a month right now, um, at least pre-Omicron .The fact that we're not, certainly reflects a lot of these, these issues that companies are having,  really preventing people from getting back to work and slowing economic growth. And that's why we're talking about maybe four or 5% economic growth, not 10.

Ryan (30:40):

Right? I mean, just this morning, I didn't really have a chance to read it, but The Wall Street Journal headlines talking about now there's a coal shortage at U.S. power plants and it's not surprising. There's a shortage of everything it feels like. Um, so just add that to, um, lump of coal, I guess, add that, to the issues that we continue to see. So, so with all of that though, guys, thank you very much for being here this week at the latest LPL Market Signals podcast. Thanks to Jeff as always for a fun conversation. Thank you to Neil, our producer, who helps us get this out to the masses in a really neat and professional, sometimes we need that help that professional way. So thank you, Neil. And again, a lot of things happening and out there, please continue to follow LPL Research.com. You can follow us on Twitter, um, and listen to these old podcasts.

Ryan (31:24):

There's still probably some gems in there somewhere, maybe not everywhere, but if you could find one, I bet it's in there, like, like a piece of coal. You break it down. It's bright diamond in there somewhere. Um, so with all that, everybody, we will be back next week and next week's going to be a really exciting one because again, Jeff and I will break down our 2022 outlook where we see the world heading as it pertains to stocks, bonds, economy, policy, and probably a little bit of, um, you know, COVID and Omicron discussion as well. So with that, everybody have a great week hope everyone had a really happy Hanukkah to everyone. Hopefully everyone had an  awesome Thanksgiving. Itis the holiday season's coming December is right around the corner. So let's just keep it going. And hopefully this bull market keeps going as well. We'll see you next week and we’ll  talk about the outlook. Take care, everyone. Bye-bye