The stock market got crazy in November, as investors tried to make sense of a deluge of news -- both good and bad. Overwhelmingly positive third-quarter earnings results were overshadowed by concerns about supply chain disruptions, rising COVID-19 infection rates, inflation, and high unemployment. The CBOE Volatility Index spiked, and the month closed with big gains and big losses in successive days. Investors should keep these stock market forces in mind as we move into the final month of 2021.

1. Consumer data will have an extra-large impact on markets

Third-quarter earnings season was strong overall, but a variety of new threats have raised tension in the stock market. Investors will key in on interim sales reports to figure out how consumers are behaving and how businesses are dealing with supply chain issues and labor shortages.

Markets are reacting to news of the omicron coronavirus variant, as European governments enact new restrictions. Major stock indexes stumbled around 2% on the day after Thanksgiving as a result. Ongoing inflation and high unemployment are also threats to consumer spending as we enter the holiday season. Consumers are considered the driving force of the American economy, so weak spending could spill into other sectors.

Person looking into a crystal ball that shows cash in the future.

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Businesses are struggling to deal with these issues and the related supply chain disruptions. It's difficult to source materials and pay workers right now, which leads to higher costs. Everyone is figuring out how much of those costs can be passed along to customers and what the new competitive environment will look like. Profits will be threatened for companies that can't adapt.

The whole situation is even more exaggerated with stock valuation ratios near historically high levels. It's a recipe for volatility.

Expect Black Friday and Cyber Monday news from payment processors and retailers to carry more importance than usual. There should be extra scrutiny on economic indicators, including consumer sentiment and retail sales. Monthly reports from automakers and travel stocks are bound to get more attention, too. Analysts are forecasting 7% to 10% growth in retail sales during the holiday season, so anything short of that could lead to a market sell-off.

Don't be shocked if markets tumble or climb any time that new retail and consumer data is published.

2. Inflation will be a major theme

Inflation is caused by complex forces that can't be changed overnight. Rising prices won't be corralled this month, so expect inflation to continue influencing the stock market.

Nearly 70% of S&P 500 companies mentioned the supply chain in their third-quarter earnings calls. That's higher than any quarter in recent history. Consumer discretionary stocks and industrials are among the most impacted sectors.

We're also in the midst of a reshuffling of a labor force. Many people relocated or switched careers, and it takes time to sort that out. Despite elevated unemployment levels, it's a seller's market for labor. New hires are more expensive than ever before. Some businesses will be forced to raise prices to offset higher expenses, and many consumers will absorb those higher prices with their better wages. We'll find equilibrium eventually, but not for several months.

The reappointment of Jerome Powell seems to confirm that the Federal Reserve is committed to managing inflation by tapering. Reduced money supply and higher interest rates should pull back on inflation, though it won't happen overnight. 

Inflation remains a major theme, and any unexpected data related to it will move markets. 

3. Expect a bumpy ride in December

December is usually a pretty calm month in the stock market. Investors and asset managers like to spruce things up and finalize their portfolios for a peaceful end of the year. Based on the predictions above, we probably won't have that luxury this year. 

Early retail sales data from Black Friday and Cyber Monday is mixed. Black Friday sales appear better than last year but still worse than 2019. Online sales took a step back on Black Friday compared to last year, putting extra pressure on Cyber Monday to exceed forecasts. Early indications are that Cyber Monday was roughly in line with expectations.

Retailers are forced to limit and spread out promotional pricing due to supply chain issues, and consumers are price-sensitive right now. This isn't all bad news, but it seems very unlikely that retailers will sail through the holiday season and blow expectations out of the water. Some stocks are bound to take steps backwards.

The ongoing pandemic is another big question mark that could cause some havoc. Cases are spiking in Europe, and the omicron variant is drawing some attention as it spreads out of Africa. Any indication of reduced efficacy in natural immunity and the developed treatments would be bad news for markets.

A number of restrictions have already been announced in Europe. In the best-case scenario, these restrictions could be brief and modest. A serious public health crisis would be avoided, and the economy would remain fairly stable as people and businesses are better equipped by experience to deal with lockdowns or travel bans.

Let's keep our fingers crossed that things pan out this way, but there are still a fresh set of challenges across a variety of sectors. Business operations are bound to endure some level of disruption in December, which could be trouble with optimistic stock valuations.

Hang on to your hats

Prepare yourself for volatility, especially if you have a short investment time horizon. Don't panic and leave the market completely, because stocks are one of the best hedges against inflation. Keep a long-term view, and be aware of the major risks in the market today.