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Happy Holidays!! ๐ŸŽ

Good evening everyone and happy early weekend! Best holiday wishes to you and yours. โœจ

The Santa clause rally came to fruition. ๐ŸŽ… The S&P 500 spiked 0.62% and closed at a new record high! The Russell 2K rallied 0.89% as the top performer. The Nasdaq trailed closely behind, increasing 0.85%.

Tesla trotted 5.76% to make it three straight days of gainz. ๐Ÿค‘ $TSLA was up 14.42% this week and closed back above $1K. ๐Ÿ’ช

9 of 11 sectors closed green. ๐Ÿ€ Consumer discretionary climbed 1.4% and industrials followed with a 1.18% gain.

Bitcoin blasted 4.5% to blow above $50K. $ETH.X is up 2.35% and trades at $4,100.

Crude oil improved a percent and broke above last weekโ€™s high of $73. ๐Ÿ“ˆ

Nikola Corp climbed 18% on tremendous volume after releasing a tweet about its first-ever customer delivery. ๐Ÿ‘

$HNP hopped 8.76%, $ALLK ascended 22.22%, and $AAVE.X accelerated 19.8%.

Here are the closing prices:ย 

S&P 500 4,725 +0.62%
Nasdaq 15,653 +0.85%
Russell 2000 2,241 +0.89%
Dow Jones 35,950 +0.55%

COVID

Little Time for Omicron

Little Time for Omicron Featured Image

The fifth wave of COVID is here, but you’d hardly guess that if you look at the markets. Stocks marched to a record close today before the markets close for the Christmas holiday tomorrow. ๐Ÿ†

Over the last week, as the S&P 500 marched 73.29 points (or 1.58% to 4,725.79), the Coronavirus looked like it would continue its own march. The 7-day average number of worldwide cases on Dec. 20, the most recent day for reported data, was 667,197. However, case numbers for the last few days have been on the higher end of 700,000.

By and large, the U.S. is the leader in new cases (243,676). Those figures helped push America’s total cases to over 50 million in the last week, which has been accompanied by another grim milestone: over 800,000 deaths. That’s so bad that it actually prompted a sharp reduction in U.S. life expectancy, and it also means that 1 in ~412 Americans have died of COVID-19 since the start of the pandemic. That might seem high, but that figure will probably crawl higher โ€” only 61.7% of the country is “fully vaccinated.

This week, the FDA approved two antiviral pills which hope to keep COVID at bay, one by Pfizer and another by Merck. The market reacted well to both drugs’ approval just in time to arrest Omicron’s impact. It’s a good thing, too, because hospital capacity is starting to rise again in most states. As of today, 77.4% of inpatient beds are in use (at least from the hospitals tracked by the HHS.)

The real question on everyone’s mind is: when does this end?? Will we have to go back to lockdowns? How does this impact the economy? Ultimately, the Coronavirus was very lucrative for the stock market (because of the monetary policy it created.) We have a labor shortage almost entirely because of the large number of seniors and folks over the age of 50 who retired early thanks to their 401(K) and IRA gains. You can assume most of the lucrative growth is behind us, especially as we roll into 2022.

In that sense, Covid is more of an inconvenience than a meaningful disruption.

One thing is certain, though. The current administration has no desire to go back to the early days of the pandemic. ๐Ÿ™… We won’t attempt another unsuccessful lockdown campaign, nor will politicians offer more stimulus checks/SBA relief. While COVID is still here, over a fifth of people have already gone back to their pre-pandemic lives. It’s unlikely the virus will ever fully go away, but people’s tolerance to continue living restrained lives absolutely will. ๐Ÿšจ ๐Ÿšจ


Data

New Home Sales Aren’t So Hot

New Home Sales Aren’t So Hot Featured Image

The housing market has been a hot topic of discussion throughout the pandemic, and thatโ€™s definitely not about to change โ€” last month, sales of newly-built homes were down 14% YoY as first-time homebuyers struggled to navigate market prices. ๐Ÿ‘Ž

New home prices are high right now for two main reasons. โœŒ๏ธ First, the supply of existing homes has hit historic lows. Secondly, construction materials are expensive right now, so higher construction costs mean more expensive homes. In November, the median newly-built home price soared 19% YoY. As the supply of existing homes continues to dwindle and push up the prices of new properties, Chief Pantheon Economist Ian Shepherdson shared:

โ€œA hefty correction appears to be due, but the rapid increases in existing home prices โ€” inventory in that market is only one-third the level in the new home market, relative to sales โ€” is putting extra upward pressure on new home prices.โ€

According to CNBC, โ€œMortgage applications to purchase a newly built home were down just 2% in November from a year ago.โ€ย  That implies that there areย a lot of people interested in buying new homes, but they can’t make a deal work. ๐Ÿคท That might be why existing home sales are the ones rising instead of new home sales.

Builders are feeling confident, maybe even bullish, that new monetary policy (rising interest rates) will put the spotlight back on building. However, general housing prices have been on the rise for 117 months (a/k/a nine straight years), so these prices can’t rise much higher.ย 


M&A

Crocs Cracks Before Christmas

Crocs Cracks Before Christmas Featured Image

Crocs shares crashed 11.63% to five-month lows today after the company bought Heydude, an Italian casual footwear company.

$CROX dropped as investors worry about how the shoe company will fund the $2.5 billion acquisition. Crocs will take out a $2 billion loan and a $50 million credit under an existing revolving facility with its bankers to cover the $2.05 billion cash portion of the deal. ๐Ÿ˜ฌ Crocs will also issue the Heydude founder and CEO, Alessandro Rosano, $450 million in $CROX shares.

The deal is anticipated to close in Q1 of 2022. Once the acquisition is completed, Heydude will function as a separate entity with Rosano continuing to head the firm.

Crocs CEO Andrew Rees stated: “With the acquisition of Heydude, we are thrilled to add another high-growth, highly profitable brand to our portfolio. We believe Heydude’s casual, comfortable, and lightweight products are aligned to long-term consumer trends and are a perfect fit for Crocs.”

$CROX is still up 97.6% YTD.


Bullets

Bullets from the Day

TSA screens millions going into Holiday.ย Over the last week, some 14.6 million passengers passed through TSA security, implying that the airline industry might be close to completing a years-long recovery. To confirm that, the TSA screened 2,081,297 passengers on Wednesday, which was a higher throughput than the same date in 2019. This is an indicator that Omicron is not as concerning to the public as previously believed… or perhaps people have expensive travel plans they can’t afford to cancel? Check out the TSA checkpoint travel numbers.

Consumer confidence comes through with surprise beat.ย Consumer confidence is one of the best indicators of a recession, which is why investors pay close attention when the Conference Board’s Consumer Confidence Index drops every month. Analysts expected stagnant growth in the index, but were surprised to see that the index soared to 115.8 (from 111.9 in November.) This suggests that the public is feeling bullish about the economy, despite inflation and supply chain woes. Read more in MarketWatch.

U.S. bans imports from China’s Xinjiang region.ย Weeks after the U.S. announced a diplomatic boycott of the Beijing Olympics, they’re putting their money where their mouth is. President Joe Biden signed a popular bipartisan bill today which bans imports from China’s Xinjiang region. The Xinjiang region is home to China’s “vocational education and training centers” (code for ‘internment camp’) for the Uyghur Muslim minority. Read more in CNBC.