Sell Descartes (DSGX) and Maravai (MRVI). Drop Asana (ASAN) from Watch List.
It’s another ugly day out there as the market remains in wait-and-hear mode pending commentary from Fed Chairman Jerome Powell, who will update us on his latest thinking tomorrow. While investors seem to be finding a certain level of comfort with data showing vaccines and treatments are effective against the Omicron variant, the wholesale inflation number from today and prospect of rate hikes is casting a bit of a pall over the market.
The flip side to all this is that there are likely seasonal factors playing into the market’s weakness (tax loss selling right now seems increasingly attractive). And the truth is we’re seeing pullbacks and valuations roughly in line with historical norms in areas like software. History also shows that both tech and pharma stocks – two areas hit hard recently – tend to do relatively well during rate hike cycles. These are just a few of the reasons why it’s hard to want to get out of high-growth names at current levels.
Still, we’ll take our medicine with two names today.
First on the sell block is Descartes Systems (DSGX) which just broke lower. And we’ll also wave goodbye to Maravai Lifesciences (MRVI), which I’m very surprised hasn’t been able to make more upward progress given the company’s role in the Pfizer (PFE) vaccine.
Today we also move Coinbase (COIN) and Sea Limited (SE) to hold. These recent additions have been beat up enough to where I suspect those that wanted to buy into a pullback have already done so.
Remember we’ll have the December Issue of Cabot Early Opportunities out tomorrow. I suspect we’re in for continued volatility (could be to the upside) in the back half of the week as investors digest Powell’s comments, which consensus suggests will point toward a couple of rate hikes in 2022 followed by three more in 2023, along with the beginning of the tapering process.