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November 2021 - Market Flash

News of a new COVID variant, dubbed Omicron, and hawkish language from Fed Chair Jerome Powell led to a volatile month for both equity and fixed income investors. Equity markets ended the month lower by -0.69%, despite starting November on strong footing. This decline began on Black Friday and coincided with the announcement of the newly discovered Omicron variant. Fixed income markets had the opposite experience, selling off early in the month as the yield on the U.S. 10-year treasury peaked at 1.66%, but then rallying as yields dipped to a low of 1.40% near month end. The new variant had the largest impact on commodities markets, which declined by more than -7%, as oil prices sunk by nearly -20%.


Most major equity asset classes found themselves in negative territory in November, driven lower by heightened volatility and uncertainty around the Omicron variant. U.S. large growth stocks were the lone exception (+0.61%), benefitting from a general flight to safety and corresponding decline in interest rates. From a sector standpoint, your traditional value sectors were the greatest laggards, with energy and financials stocks both declining by over -5%, while technology names gained more than 4%.

Stepping outside of the U.S., foreign equity markets also struggled in November, with losses of more than -4% occurring in both developed and emerging markets. Unfortunately for U.S. based investors, these losses were amplified on the month due to a meaningful strengthening of the safe-haven dollar. The benchmark DXY index, which tracks the U.S. dollar versus a basket of global currencies, ended the month 2% higher, reaching its highest level in more than a year.  

Fixed Income

U.S. investment grade bonds ended the month higher by 0.30%. This occurred amidst an interesting dynamic in rate markets, where hawkish fed language led to rate increases at the short-end of the curve, while COVID concerns led to a decline of -11 bps for the 10-year note (i.e., the curve flattened). The greatest beneficiaries of this move were those bonds with the highest degree of interest rate sensitivity or duration. This included U.S. treasuries, which gained 0.77% during the month, as well as municipal bonds, which provided investors with returns of 0.85%. High yield bonds were a clear laggard in November, declining nearly -1.00%, as their relatively shorter-duration and higher beta to equity markets created meaningful headwinds.

Real Assets

Commodities produced some of their most disappointing returns of 2021, declining by more than -7% vs. a loss of less than -1% for U.S. stocks. Energy-related commodities were by far the greatest contributor to the broad-basket index’s poor performance, as they were hit hardest by the COVID variant news. In November we saw oil prices decline by -20%, natural gas decline by -17%, and gasoline price fall by more than -16%, all of which are major components of the benchmark Bloomberg index. That being said, performance on a YTD basis remains highly positive at +22.78%, despite November’s sell off.

Closed End Funds

Closed end fund discounts ended November relatively flat during a mixed market environment, where the positive impact of lower interest rates was largely offset by pressures from heightened equity market volatility and widening credit spreads. iCM’s Tactical Income (TICE) strategy weathered the month’s volatility quite well, declining by approximately 50 bps. This slightly trailed its blended index, but outperformed the S&P 500’s -0.69% decline and the loss of -0.97% for the BarCap High Yield Bond index.

Important Disclosures

Integrated Capital Management, Inc. is an SEC Registered Investment Advisor. Registration does not imply any certain level of skill or training. Monthly “Market Flash” is intended solely to report on various investment views held by Integrated Capital Management. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable, but should not be assumed to be accurate or complete. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer or recommendation to purchase or sell a security.

Past performance is no guarantee of future results. Please note that investments in foreign markets are subject to special currency, political, and economic risks. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index.

Strategy performance results are net of fund expenses, gross of advisory fees and other expenses that would be incurred in the management of client accounts, such as commissions, transaction fees, and/or custodial charges, and reflect the reinvestment of dividends and capital gains. The client’s return will be reduced by the advisory fees Integrated Capital Management, Inc. charges for the management of an account. Individual account performance and investment management fees incurred by clients may vary as fees for smaller accounts are higher on a percentage basis than for larger accounts. Investment return and principal value will fluctuate, so shares, when redeemed, may be worth more or less than their original cost. For additional information regarding advisory fees, please review Integrated Capital Management, Inc.'s Form ADV Part 2A.

TICE Blended Index comprised of 32% S&P 500/8% MSCI EAFE/38% Barclays Aggregate Bond/20% Barclays Municipal Bond/2% Cash

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