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Morning Commentary

Covid19 Fear Factor

By Charles Payne, CEO & Principal Analyst
11/26/2021 10:16 AM

I hope everyone had a great Thanksgiving; it was more special than normal. 

The reason it was more special is because last year we were locked down from Covid19 restrictions and fear.

So, waking up to a market under significant pressure from the latest Covid-19 variant news is frustrating to say the least.

I have been worried about this for a couple of weeks because this is the same script we saw with the Delta variant.

Here’s the rub: investors cannot sell everything on a hunch even if that hunch is correct. That’s not how successful long-term investing works.

On the contrary so-called smart money will be buyers in part because they were more awful than normal this year.

There is a lot to be seen with respect to what happens with the variant and rumors it is impervious to current vaccines.

The US Economic Script

Initial market reaction driven by machines and algorithms is not the same as Main Street reaction, where it is expected lots of folks will buy those Black Friday specials.

Note, today is not the retail proxy it used to be for a number of reasons that everyone already knows but larger crowds are expected.

The last couple of weeks I have been wondering out loud why Wall Street was modelling for three rate hikes next year with all signs pointing to a much slower economy and some signals even suggesting deflation. Be that as it may, I could only get one of my favorite market guests to agree with me on no rate hikes next year, although some saw only one rate hike.

I have already been worried about savings being spent more quickly than anticipated although some of that has been in lieu of using credit. There is a lot of cash on household balance sheets and corporate America has never had this much money sitting in their vaults.

Bond Market Remains Calm

Now the market is flashing only one rate hike next year as bond yields are down a lot. The ten year was already wobbly after hitting a near-term double top.

It has to be noted the 1.74% yield from late March was never taken out despite all the noise on the street about rate hikes and inflation. The canary in the coal mine never panicked to the degree the experts panicked.

Ten-year yield   


World health officials are saying it could take weeks to understand this new variant. The market will make its own determination much sooner than that but now people are loath to have any report of Thanksgiving 2020 as most distrust governments’ true intentions.

That’s been the issue in Europe where violent protests have greeted draconian lockdown actions. It's really amazing, however, that after a series of harsh lockdowns for which European officials were lauded, officials see it as the only course of action.

Social Welfare Spending

I’m not sure how this impacts the social spending bill, which comes with heavy taxes that would limit upward mobility and crush long term economic growth. I don’t see how this is a good argument for an even greater welfare state, but someone will try to connect those dots.

Adding more cash into an economy with almost 11,000,000 jobs going begging would be a critical mistake and further change the labor market in profound ways: i.e., people will not ever want to work again. We are not building the nation back better with programs that keep folks parked on the sidelines rather than putting in elbow grease.

Due to the short trading session, we will not be sending commentary out this afternoon. Have a great weekend.

Insightful commentary, as always. I agree with your sentiments regarding social welfare spending. I also agree that the market drop is driven by algorithms, not main street. Have a great weekend as well! Thanks so much for your commentary!

Lisa on 11/26/2021 11:08:06 AM
Thank you Lisa, you as well. CP

Charles Payne on 11/26/2021 11:12:11 AM
This proposed social spending bill reminds me of the age-old saying. "When the government gives you everything you want it is strong enough to take everything you have."We are not all that far away!

William on 11/26/2021 1:59:03 PM

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