November and December have been filled with investor optimism.
News of vaccine and fiscal relief have propelled the market to new highs.
It’s clear skies ahead (apparently)…
And whilst this may prove true – things appear extended in the near-term.
Put another way – it feels like there is a lot of “pull forward”.
Dow Theory posits that the stock market is on the upswing when the Dow transportation average and the Dow industrial average make new highs, either at the same time or shortly after one another.
It is predicated on the idea that in an economy, transports deliver what industrial companies produce, and so one index will move in tandem with the other…
Two things worth watching this week:
(1) possible “bridging” deal (partial stimulus) from Congress; and (2)
sentiment from the Fed’s last meeting for the year. Both could be market moving…
Major investment banks are bullish on 2021… very bullish. This comes as global markets achieved $100 Trillion in market cap. Thanks central banks! Without “free money” – we would likely be at “half” that level. $100 Trillion is also 115% of global GDP… you might also say 1.15x sales.
The November jobs report was far worse than expected. The U.S. economy added only 245,000 jobs in November — well below the 500,000 that many economists hoped…
It’s exceptionally rare to see double-digit broad market returns in any one month.
In fact, we have only seen seven the since 1992… with one of those earlier this year (April)
Prior to 2020, the most recent double-digit return month was in October 2011, as the market recovered from a U.S. Treasury downgrade.
From there, we need to go back a further twenty years to December 1991.
“Black Friday” is generally regarded as one of the largest U.S. shopping days of the year…
It’s also the start of the Christmas holiday season shopping period.
This is a closely watched event given ~70% of all US GDP is a function of what consumer’s spend.
What’s more – it gives us insights into how and where consumers are shopping (e.g., online versus physical; specific categories etc).
Santa is coming…
He might be a little late but the gift of more cheap money is almost certainly on the way.
Great news!
Low credit spreads, trillions in fiscal stimulus with short-term rates anchored below zero through 2023 is “Christmas” for risk assets.
All that was missing was some visibility past the pandemic..
Despite the market closing slightly lower this week – the market remains optimistic. For eg, a number of economic headwinds hit the tape. However, the market remains incredibly resilient – focusing on the potential upside for next year.
When 2020 comes to a close in approx 6 weeks… it will likely be another double-digit return year. The stand-out group will be tech – with the Nasdaq up ~30% for the year – outperforming the broader S&P 500 by a solid 20%. The Dow Jones and Russell 2000 are essentially flat for the year..
