This blog will serve as follow up to our previously released Q4 Investment Themes and is intended to provide an update on what we are seeing as well as our current outlook. 

Here are the top three things we are covering in this week’s blog:

  1. The market fell across the board as fears of a renewed Covid shutdown shook investor confidence.
  2. A combination of rising unemployment claims and a worse than expected jobs report led to additional concerns of future weakness.
  3. After strong rebounds from the 2020 recession, many year over year economic data readings have begun to peak and could head lower in early 2022.


Following strong returns in October, the market rallied for much of November on the back of strong earnings and a continuously improving economic outlook. However, the strength was short lived as the announcement of a new Covid variant sent investors fleeing to protection. With fears of another Covid shutdown gaining traction, markets across the globe sold off steeply. By the time November came to a close, the S&P 500 had given up all of its previous gains and finished the month down -0.83%[1].

Falling in line with the relative strength shown throughout the initial Covid drop, the Nasdaq 100 outperformed all the other major indexes in November and closed +0.25%[2].

With a larger concentration in cyclical stocks, the Dow Jones gave up most of its quarter to date gains in November and finished -3.73%. With the outlook of the new variant still largely unknown, the struggles for cyclical “Covid losers” may worsen in future months[3].

After a strong run to begin the year, the Russell 2000 continues to struggle in the face of ongoing Covid shutdowns. With a focus in smaller companies, the Russell was hit the hardest by the initial Covid lockdowns and remains the most volatile major market index. Following a rocky month, the index finished -4.28% in November[4].

With fears that the new variant could spread across the globe, the World index fell by -2.30%[5].

After many months of strong returns and outperformance, Commodities were hit especially hard by the variant announcement. Additionally, the significant drop in Oil comes at the same time as our third-party research has estimated a peak in near-term inflation. If inflation has truly peaked, we could see Commodity returns begin to struggle over the next several quarters[6].

Despite breaking higher to begin the month, Gold remained range bound and closed November -0.41%. Even with a drop in long term treasury yields (typically a bullish sign for Gold), the strengthening U.S. dollar led to a brought Gold prices down during the second half of the month[7].  

With the near-term peak in inflation, the U.S. 10-year yield fell sharply alongside the correction in Commodity prices[8].


Total unemployment insurance claims fell further in November to just over 2.3 million. This level represents a massive drop from the prior year and is in line with pre-pandemic levels. While this drop is a positive sign for the economy, the data is reported on a multiple week delay. With the recent announcement of the new Covid variant, there could be another wave of layoffs and subsequent increase in unemployment claims. This concern has led to some sharp selling in the stock markets but could eventually create opportunity for additional economic stimulus[9].

New claims for unemployment came up slightly in November to back above 200,000. Looking back to November 2020, we saw a similar increase in claims as Covid cases surged throughout the winter months. This will be something to closely monitor if claims grow for multiple weeks in a row[10]. Continuing claims, which come at a delay to initial claims, decreased slightly and now sit just above pre-pandemic levels. However, with new claims rising, continuing claims could see a consequential pick up in the next week. Additionally, it’s critical to note that while the number of claims have fallen significantly over the past year, many people that were initially receiving benefits hit an expiration of payments but never actually returned to the workforce. These “hidden claims” could impact the long-term strength of the labor market.

Despite a small improvement over the previous month, November’s jobs report came in worse than expected and sent shock waves through the market. The unemployment rate fell slightly to 4.20%. This was marginally better than the expectation of 4.5%[11] and provide some damper for negative reaction to other parts of the report. Concerningly, non-farm payrolls (new jobs added) came in at 210,000, much lower than expectations of 550,000. This report initially caused a selloff in the stock market and perpetuated fears of a weakening economy. Additionally, with inflation registering at the highest levels in many years and another potential Covid shutdown on the horizon, this poor report could be just the beginning of a rough winter[12]. As expected, YoY GDP came in around 5% for the third quarter. While this is lower than the historic reading from Q2, YoY GDP near 5% is a good sign for the economy. However, largely supporting this strong number is the weak data from Q3 2020. Just because the GDP reading is higher than the previous year does not necessarily mean that the economy is back to pre-pandemic strength. Additionally, YoY

CPI showed a sizeable increase of 5.34% over the previous year. With the combination of supply chain bottlenecks and numerous direct to consumer stimulus payments, the expectation for inflation to rise throughout 2021 came as no surprise. While the jump in inflation has been kept under control for now, many are left wondering just how far it will go. Based on our third-party research, we expect inflation to peak in Q4 before stair stepping lower in 2022. This estimate has been supported so far with the recent drop in commodities and other inflation linked assets[13].

Pending home sales rose slightly in October but fell on a YoY basis. This reading comes as home prices continue to skyrocket higher across the country. However, with inflation beginning to show signs of a near-term peak, we could begin to see a deacceleration in home prices[14].

Another concerning data point has been the ongoing crash in consumer sentiment. After the announcement of the new Covid variant, consumer sentiment fell past the March 2020 bottom to the lowest level in nearly 10 years. As we discussed in previous market updates, this is worrying because of the widening disconnect between sentiment and the stock market. As we witnessed on the day the variant news was released, this level of a disconnect can lead to a very swift and sharp correction. While this recent move has begun to stabilize, we will be watching closely for any signs of a larger market shift in upcoming months[15].


  1. After spiking higher in October, the market fell in November on concerns of a renewed Covid shutdown.
  2. Concerns persist with many of the YoY economic data readings beginning to slow, inflation continuing to accelerate, and the further disconnect between stocks and consumer sentiment with the emergence of the new variant.
  3. While market participants have enjoyed a huge bull run over the past 1.5 years, many economic and political concerns lie in the months ahead. For this reason, we have begun shifting our Konvergent investment philosophy to an All-Weather approach that is designed to perform in all market environments.

We hope you have enjoyed getting a deeper look into our investment research and look forward to providing this to you each quarter going forward. Thank you from the entire Konvergent Team!

[1] Slide 3: S&P 500
[2] Slide 4: NASDAQ 100
[3] Slide 5: Dow Jones
[4] Slide 6: Small Caps
[5] Slide 7: World Stock Market Index
[6] Slide 8: Commodities
[7] Slide 9: Gold
[8] Slide 10: US 10-Year Yield
[9] Slide 12: Total Claims
[10] Slide 13: Unemployment Claims
[11] Job growth disappoints in November, with a nonfarm payrolls gain of just 210,000 (
[12] Slide 14: Jobs Report
[13] Slide 15: GDP & Inflation
[14] Slide 16: US Home Sales
[15] Slide 17: Consumer Sentiment