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| By Kenny Polcari |
We've got 51 weeks down and one more to go — and frankly, 2022 can't end soon enough for me.
While it's usually all quiet on the Wall Street front around the holidays, last week ended up being very active and perplexing.
In many ways, it proved to be a microcosm of this year.
Wrought with volatility, sharp spikes in the cost of living and interest rates, angst about the economy's direction and impact on corporate earnings, 2022 is leaving most investors exhausted and uncertain.
The last five trading days were no exception.
After a relatively flat Monday and Tuesday, we saw a pre-holiday rally on Wednesday where the Dow Industrials, S&P 500, Nasdaq, the small-cap Russell index and the Dow Transports all rose 1.5% on average.
The rally, largely due to Nike (NKE) and FedEx (FDX) delivering better-than-expected earnings and optimistic messages about consumer confidence moving forward, also boosted the stocks 12% and 3.5%, respectively.
In fact, here's a look at NKE's chart …
Click here to view full-sized image.
Members of Camp Optimism (the same ones in denial about the Fed's follow-through on interest rate hikes in 2023) figured maybe, just maybe, that means those two companies will set the tone when earnings season starts on Jan. 13 and banks begin reporting.
Of course, many from that camp probably avoided digging any deeper and didn't realize that Nike and FedEx — and a slew of other companies —have slashed and burned sales numbers and forward-looking metrics so much, the bar is set pretty low at this point.
If they had investigated further, they would've taken both companies' upbeat messages with a grain of salt — just like the rally on Wednesday.
Hopes for continued pre-holiday cheer came to an abrupt halt on Thursday after the Commerce Department raised its estimate of Q3 GDP growth to 3.2% from a prior 2.9%. The market took a nosedive, erasing gains from the previous day.
Neither the up- nor downswing makes much sense.
One day, investors reward stocks because they anticipate a better-than-expected earnings season and higher consumer sentiment.
The next day, they punish stocks because the economy grew.
Sounds to me like there are a whole lot of folks making emotional investment decisions and relying on hope instead of facing facts and reality.
That, my friends, is a recipe for disaster and disappointment. It's OK to be hopeful and positive … but make decisions with your head, not your heart.
That means starting 2023 with safety as a priority — and don't stop until the market says you should.
Once the powers that be iron out our country's challenges and the bear goes back into hibernation, your patience will be rewarded with the potential opportunities of a lifetime.
On that note, I wish you all a happy, healthy and wealthy New Year!
To your Wealth & Wisdom,
Kenny Polcari
