Welcome to my latest video presentation. For a condensed transcript, read the article below.

I’m reminded lately of those Hammer films with Christopher Lee as Dracula. Technology stocks respond to rising interest rates the way vampires respond to sunshine. It’s not a pretty sight.

The tech-heavy NASDAQ is now in full correction mode, creating a downdraft for the broader market. The main culprit has been rising bond yields. The NASDAQ is trading more than 14% down from its November 2021 record high.

The value of any asset is its future cash flows discounted at the existing interest rate. Growth stocks (notably, high-momentum tech shares) have higher expected future earnings; when interest rates are rising, those future earnings are worth less. Accordingly, investors have gotten into a bearish mood (see table).

Grim milestones were achieved last week.

It was the worst week for the S&P 500 and NASDAQ since March 2020. January has been the NASDAQ’s worst month since October 2008. The Dow finished last week down 1,600 points. The S&P 500 this year is off to its worst start since 2016.

It didn’t help that the latest operating results from bellwether tech stock Netflix (NSDQ: NFLX) were deeply disappointing. When compared to subscriber additions in Q4 2020, the 8.28 million added worldwide in Q4 2021 represent a continued decline, news of which sent the company’s shares in a free-fall.

It’s not just the twin threats of inflation and Federal Reserve tightening. The economic re-opening has unexpectedly come under threat by a pandemic that many of us thought was on the verge of getting vanquished.

In the first half of January, an estimated 8.8 million U.S. workers were compelled to stay home because of a COVID infection or the responsibility of caring for an infected family member. That number represents an increase of more than two million people on a year-over-year basis. It’s also the largest workforce shortage since the initial outbreak of the pandemic in early 2020 (see my video for additional charts and details).

The good news is that Omicron’s symptoms are relatively mild, and the variant’s spread appears to be peaking. The bad news is, Omicron is still forcing an increasing number of people to stay home, causing disruptions in the economy and supply chain.

Watch This Video: Where Are We in The Economic Cycle?

When the Delta wave started to wane in late 2021, many people assumed that the worst of the pandemic would soon end, but the emergence of Omicron was a curve ball that no one expected. In recent weeks, case numbers have reached all-time highs, denting the economic recovery and financial markets.

Small wonder that the American public’s optimism is cratering, according to the latest data released on January 20 by polling firm Gallup.

When asked about the coronavirus situation in the country between January 3 and 14, only 20% of respondents said that conditions are getting a lot or a little better, down from a pandemic high of 89% in June 2021 and 51% in the wake of the Delta wave in October. Respondents who think conditions are getting worse came in at 58%, up from 18% in October and from a pandemic low of 3% before Delta’s emergence in June.

Consumer spending accounts for about 70% of U.S. gross domestic product, so much rides on the shoulders of the shopper. If Omicron does indeed peak and life returns to a semblance of normalcy, consumers may emerge from their funk. But if that doesn’t happen soon, falling confidence could become a self-fulfilling prophecy and continue weighing on stocks.

Is the stock market on the cusp of a crash? I don’t think so. There’s still plenty of fuel left in the tank, so to speak, to keep the rally alive in 2022. Notably, corporate earnings overall remain strong and the economy continues to expand. But gird yourself for a volatile winter, as the Fed’s termination of easy money sends a chill through equity markets.

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John Persinos is the editorial director of Investing Daily.

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