Weekly Investment Update November 14, 2022

Key Events: The Red Wave never reached the shore

Elections appear to have produced a rightward shift that fell far short of expectations. Republicans will likely capture the House with a narrow majority, but Democrats have regained control of the Senate.

Inflation data came in below expectations, with some evidence of slowing, and the market responded with strong gains as the Fed may be more likely to taper its aggressive rate hikes.

Market Review: Despite a Cryptocurrency meltdown, risk assets stormed ahead.

Digital assets sold off significantly as one of the crypto exchanges, FTX, headed towards collapse. Its ‘native token’ cryptocurrency lost 90% of its value on the week, while Bitcoin dropped almost 15%.

Despite losing ground the day after the election, stocks roared back due to the market-friendly inflation numbers. The S& 500 finished the week up 6.4% while international stocks, measured by the MSCI EAFE, gained 8.2%. Bonds also gained ground as investors adjusted to expectations of a 0.5% December rate hike, down from an expected 0.75% increase.

Outlook: Focus on the long-term

This week saw some tremendous moves: As can be seen in the chart below, cryptocurrencies lost over $500 Billion last week^[1] as speculative excesses unwound, and large cap stocks gained more than 6%. With the political map not fully set and the market’s myopic focus on the data point du jour, we should expect continued volatility. There is likely to be another piece of economic data soon that causes just as violent a market reaction as this week’s mild inflation data did. At the risk of being repetitive, we urge investors to stick to their discipline in the face of volatility. This week’s cryptocurrency carnage also reminds us to avoid invest in things unless we understand the risks. Talk with your advisor and make sure you understand what you own.

Cryptocurrency market cap tumbles in 2022 ^[2]

Navigator Outlook: November 2022

^[1]Source: Businesss Insider
^[2]Source: Tradingview Total Crypto Market Cap — Index Chart — TradingView

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