Lexicon Financial Group Weekly Update

Monday, December 6, 2021

Looking Back

…and then it was December. Uncertain news leads to uncertain markets.

November wasn’t particularly positive for equity investors, closing out the month (November 1 – November 30, 2021) down across most major markets. In the US, the benchmark S&P500 was off -1.01%, while its Canadian counterpart the S&P/TSX was off -2.76%. Market uncertainty was seen throughout the month, and the VIX increased from 16.26 on October 29, 2021 to 27.19 on November 30, 2021. The VIX is a common measurement used to indicate market volatility, which tends to translate into uncertainty. (1)


I often find it informative to look back at the key economic highlights from the past few weeks. Some continue to dominate the headlines, but other news items come and go like the wind. Here is a rough recap of a few of the events that led to uncertain November markets.

• Nov 3 – US Fed (or feds) held the interest rate at .25%

• Nov 4 – Initial jobless claims were better than analysis predicted, dropping to 269k from its consensus estimate of 278k

• Nov 5 – In the US, the October unemployment rate fell to 4.6% from its prior rate of 4.8%. In Canada, the unemployment rate also fell to a 20-month low (6.7%), which is within 1 percentage point of where the economy was pre-pandemic in February, 2020 (5.7%). Rising employment (more people working) generally has an inflationary effect on the economy as more people working equates to more people with money available to spend.

• Nov 12 – The University of Michigan Consumer Sentiment Index came in lower than expected, measuring 66.8 when analysts anticipated 72.5. This meant that consumers were less inclined to make purchases, in large part due to escalating costs due to inflation. These surveys contain useful information for better understanding the relationship between consumer sentiment and the real economy. The numbers in November were at their lowest levels in a decade, indicating that consumers are not confident in the health of the US economy. Consumer sentiment often shows itself in the capital markets, which might account for some of the volatility felt in November equity markets.

• Nov 24 – The FOMC (Federal Open Market Committee) announced that it would be increasing its tapering of stimulus to the US economy.

• Nov 26 – Omicron, a new variant of COVID-19 was more broadly announced to the world. Despite initial reports of it being a variant unique to South Africa, it has since been discovered in more than 20 countries globally.


Looking Ahead

Regardless of where you live, everyone seems to be glued to news coming out about the Omicron variant. Governments around the world, having learned that an ounce of prevention is worth a pound of cure, are enacting travel bans and enhanced screening practices to try and stop another “wave” of infections. That said, these moves are not without their critics.

Indeed, while the majority of citizens are pro-mask and pro-vaccination to try and end the spread of COVID, voices from the either side of aisle are loud and strong, meaning that any decision governments make will never be met with full support of its citizens. Despite this, countries such as Greece have already announced strict vaccine mandates for its citizens.

All of this when scientists are still studying this new variant to determine its transmissibility and severity, as well as its potential to evade the existing COVID-19 vaccines that are already in widespread use. Looking ahead… scientists require more data before we’ll have any certainty about the appropriate policy directions that must be taken.

From an interest rate perspective, policymakers around the world have begun signaling rising rates. The table below from Factset shows some historic and anticipated rates for major markets. (2)

Country 2018 2019 2020 2021 2022 2023
Canada 1.75% 1.75% 0.25% 0.25% 0.88% 1.63%
US 0.75% 0.75% 0.10% 0.10% 0.50% 1.0%
UK 2.50% 1.75% 0.25% 0.25% 0.50% 1.15%


Rising interest rates have historically been able to tame inflation. When predicting the movement of capital markets, history is best used as a drunkard uses a lamppost; for support rather than complete illumination. That’s why the industry is fond of stating the obvious “past performance does not guarantee future returns”.

Markets generally adjust to news, so it will be interesting to see if other economic issues currently taking place – supply chain disruption, COVID response, etc. – derail central governments approach to slowly increasing rates. Markets ultimately will need to adjust, but so will consumers and business – especially those who have taken on significant levels of debt.


Further Reading

Markets & Investing – Raymond James


Further Listening

Covid-19 Omicron--what we know with Chris Meekins, Managing Director, Equity Research, Raymond James Financial


The opinions expressed are those of Craig Swistun and not necessarily those of Raymond James Investment Counsel which is a subsidiary of Raymond James Ltd. Statistics and factual data and other information presented are from sources believed to be reliable but their accuracy cannot be guaranteed. It is furnished on the basis and understanding that Raymond James is to be under no liability whatsoever in respect thereof. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Raymond James advisors are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters.

  1. Data provided by Factset showing the price return of all major indices from November 1, 2021 till November 30, 2021 in its respective local currency.
  2. Data provided by Factset showing some historic and anticipated Policy rates for major markets.