Almost Cooked

Almost cooked.  Stocks rallied yesterday as Congressional leaders appeared to zero in on a stimulus package.  Motivation on both sides of the isle sparked a broad-based rally in stocks.

N O T E W O R T H Y

Mixed emotions.  The holidays are upon us, but is anyone paying attention?  We are, after all, still in the midst of an epic pandemic, which appears will get worse before it gets better.  We have worked from home, worked from the office CAREFULLY, eaten gourmet meals in parking lots, shopped online A LOT, rationed toilet paper, mourned friends and loved ones, gotten used to wearing masks, used Zoom for just about everything… and witnessed the shortest bear market in history only to see stocks hit all-time highs again and again… and again (yesterday was one of those for a few of the indexes).  Oddly, but sadly, the stock market’s rise appears to be correlated to the rise in virus cases.  Is your head spinning yet? It’s the holidays!  For most of us, it won’t be normal, being separated from loved ones.  Many have lost income or are without jobs altogether.  Small business owners are rightfully nervous about pending, more draconian lockdowns which may come as soon as Christmas.  Still, it’s the holidays… so let’s collectively take a deep breath, smile… and check in with the markets, which too are welling with emotions.  There is a conflict between the near term, the middle term, and the long term.  I am sure that I don’t need to provide you with too much detail on the short term other than: 16.725 million = number of confirmed COVID cases in the US, 303,867 = COVID deaths in the US, full lockdown = Germany, Netherlands, UK (tier 3), and Czech Republic, 6.7% = unemployment rate, GDP = expected to have shrunk in 2020. Ok, let’s call that not good.  Middle-term can be described by the following metrics: 3+ billion = doses of vaccine to be provided in 2021 by Pfizer and soon-to-be-approved Moderna with more from others, $748 billion = fiscal stimulus being negotiated by lawmakers, $160 billion = more stimulus for states - being discussed, 0% = Fed funds rate - not likely to change anytime soon, and $120 billion = amount of treasury and mortgage bonds purchased by the Fed monthly as part of QE stimulus.  Long term… well we don’t have too much tangible numeric data on that other than: virus will eventually be contained, all good things, blue skies, rainbows, health, and… hopefully a return to some form of normal.  Also, maybe infrastructure spending, alternative energy investments, return to global economic cooperation, inflation, a big federal deficit, Elon Musk will get richer, more iPhone sales, cruises, air travel, movies IN THEATERS, inside dining, higher interest rates, and… wait for it… normal holiday seasons.  The stock market is focused on the middle and long terms, which is why its rise appears to be unflappable.  The bond market is not yet convinced and is more focused on short and middle term, which is why yields have risen somewhat, but not on par with the stock market’s bullish stance.  What about the rest of us?  Well, we have to deal with the realities in the near term and the middle-term… with the hopes that they will pass quickly so that we can enjoy that long term. Reminder: it’s the holidays!

THE MARKETS

Stocks ascended yesterday on hopes that Congress is getting closer and closer to a stimulus package.  The S&P500 rose by +1.29% with gains in all sectors, the Dow Jones Industrial Average climbed by +1.13%, the Russell 2000 jumped by +2.40%, and the Nasdaq Composite Index traded up by +1.25%.  Bonds gave up some ground and 10-year treasury yields added +2 basis points to 0.92%.  Crude oil, sensitive economic growth, added +1.34% on the news, carrying the energy sector up by +1.92%.

NXT UP

- Retail Sales (Nov)  are expected to have slowed by -0.3% after rising by +0.3% in the prior month.

- Markit Manufacturing PMI (Nov) may have slipped to 55.8 from 56.7, while the Services PMI may have gone to 55.9 from 58.4.

- NAHB Housing Market Index (Dec) is expected to have dropped to 88 from 90.

- The Fed will conclude its FOMC meeting today and announce policy and follow up with a presser at 2:00 PM.  Interest rates are expected to remain the same but some nuances on QE are expected by some economists and Fed watchers.

daily chartbook 2020-12-16