Telemus Weekly Market Review January 31st - February 4th, 2022

    | February 7, 2022


    Equity market volatility remains elevated with stocks rising this week as the S&P 500 posted a gain of 1.6%. The NASDAQ Composite came in even stronger adding +2.4%. Markets experienced some earnings-related pain, with a few select technology companies standing out as notable disappointments.

    We’ve been talking about 2022 being a year where the economy is going to need to stand on its own two feet as the punchbowls of fiscal and monetary stimulus are being pulled away. At the corporate level this must occur as well, as we are returning back to normalized conditions and there is inevitably going to be greater dispersion in outcomes as there is no longer a rising tide (of stimulus) lifting all boats.

    Early in the pandemic many companies stopped providing guidance as it became too hard to forecast business conditions. That flowed into 2021 as the economic rebound was equally challenging to predict. We are now at a point where business conditions are returning to normal. Markets have become more conditioned to consistent results, where if anything the inconsistencies were to the positive.

    As we look at the results that have been reported thus far for the fourth quarter of 2021, by and large, they remain strong with 80% of companies having met or exceeded expectations. This level has decelerated slightly from recent quarters, although it remains slightly ahead of historic norms. We have, however, seen the magnitude of earnings beats come down considerably. Moreover, when companies are missing expectations their stock prices are being punished. This is most emblematic among higher priced growth stocks, where suboptimal results are being met with outsized downdrafts as the next group of buyers is requiring a much greater discount in price.

    This past week PayPal and Facebook stood out as recent technology favorites that are seeing cracks in business conditions. PayPal is experiencing a slowing in its payments volume, resulting in its shares falling nearly 25% after it reported. Alternatively, Facebook has seen a deceleration in advertising spending, which led to 26% drop. Facebook’s woes looked to be more company specific after competitor Snap, Inc. reported much strong conditions the following day. These issues don’t appear to emblematic of broader macro concerns, but rather company specific outcomes.

    To some these harsh reactions to earnings misses appears a bit out of line. However, they aren’t uncommon for meaningful changes in business conditions. We expect to see a wider divergence in corporate conditions as the benefits of stimulus fade and companies go back to issuing guidance. This will have the effect on creating greater dispersion across stock returns, an outcome we would expect to present opportunities for those engaged in active security selection. We’ve seen this type of outcome occur before, both coming out of the tech bubble and the great financial crisis.




    All opinions expressed in this article are for general informational purposes and constitute the judgment of the author(s) as of the date of the report. These opinions are subject to change without notice and are not intended to provide specific advice or recommendations for any individual or on any specific security. The material has been gathered from sources believed to be reliable, however Telemus Capital cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Investment decisions should always be made based on the client's specific financial needs, goals and objectives, time horizon and risk tolerance. Current and future portfolio holdings are subject to risk. Risks may include interest-rate risk, market risk, inflation risk, deflation risk, currency risk, reinvestment risk, business risk, liquidity risk, financial risk, and cybersecurity risk. These risks are more fully described in Telemus Capital's Firm Brochure (Part 2A of Form ADV), which is available upon request. Telemus Capital does not guarantee the results of any investments. Investment, insurance and annuity products are not FDIC insured, are not bank guaranteed, and may lose value.

    The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities. There is over USD 11.2 trillion indexed or benchmarked to the index, with indexed assets comprising approximately USD 4.6 trillion of this total. The index includes 500 leading companies and covers approximately 80% of available market capitalization. The Nasdaq Composite Index is a large market-cap-weighted index of more than 3,000 stocks, American depositary receipts (ADRs), and real estate investment trusts (REITs), among others. The Index's composition is over 50% technology, with consumer services, consumer goods, and financials the next most prominent industries.


    An index is not a security in which an investment can be made, as they are unmanaged vehicles that serve as market indicators only and do not account for the deduction of management fees and/or transaction costs generally associated with investable products. Advisory services are only offered to clients or prospective clients where Telemus and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Telemus unless a client service agreement is in place. All composite data and corresponding calculations are available upon request.

    Matt Dmytryszyn

    Matt joined the Telemus team in 2018. As Chief Investment Officer, he leads the firms the investment process and research effort. Matt has experience as an equity analyst and portfolio manager and has advised corporate pension plans on their manager selection. He’s been quoted in Money Magazine and Barron’s.

    Matt Dmytryszyn
    New call-to-action
    New Call-to-action