Gimme' More

Gimme’ more.  Stocks rallied yesterday as investors refused to get discouraged about Trump’s threat to veto the hard-wrought stimulus 2.0 deal.  Mixed economic numbers also failed to stop economically sensitive stocks from elevating.

N O T E W O R T H Y

Winning, winning, no whining.  A rally couldn't be stopped, even by the President’s 11th hour video Tweet bomb threatening to veto the new stimulus and spending bill.  Well, he did ask for more direct payments… specifically $2000 per individual… that is a +233% increase on the already agreed upon amount.  Forgetting where that money would come from, $2000 in helicopter money airdropped into the pockets of many Americans seems like it would go far to stimulate the economy in the near future.  But wait, Congressional lawmakers have been fighting for months over that $600 number.  So, is the deal dead in the water?  Seizing on the political soft pitch served up by the President, many Democrats, who were previously in favor of larger payments, pledged to amend the bill and bend to his wishes.  Republicans, who now find themselves at political odds with the President, have vowed to re-look at things, but also plan to block any moves proposed by Dems.  One might think that this is a disaster scenario, but there may be a silver lining.  First of all, given the tender place in which the economic recovery is (see my note from yesterday), more stimulus sooner would be better, so if the President’s threat foments even a minor upward adjustment in aid, it would be something to cheer about.  What if Lawmakers can’t agree on a raise and the President actually vetoes the bill?  Congress has the ability to override a veto with a supermajority vote.  In the Senate, that would take 67 yea’s to override a veto and the bill which now collects dust on the President’s desk was passed with 92 yea’s and just 6 nay’s.  So yeah, lawmakers will fight a bit more after Christmas and hopefully come up with some more money, which would be great, but at the end of the day, they can still override a veto.  That makes $600 the baseline with potential upside.  The only downside is that any payments would be delayed while Congress does its thing.  That delay can be costly as many struggling people are on the verge of being evicted, extended unemployment benefits run out on Saturday, and small businesses… well you know.  More importantly, the delay has served to add more anxiety to the already anxious consumer.  We know consumers are anxious because the confidence numbers have been decreasing, and even more sobering, spending numbers are down.  Yesterday’s release of PCE (Personal Consumption Spending) showed a -0.4% decline in November, which is the first time spending has pulled back since the recovery began earlier this year.  Yesterday’s numbers also showed that 803k new unemployment claims were filed last week, the first decline in 3 weeks.  While the number was lower than expectations and the prior week’s 885k claims, it still remained above 800k for a third week.  The stock market, meanwhile, is focused on the future with value stocks and small caps outperforming growth and large caps.  That group is economically sensitive and would deeply benefit from a vigorous recovery.  Speaking of focusing on the future… it is Christmas Eve!  It is a good time to reflect on what we have here and now.  For me that is my family, my friends, my co-workers, and my health.  Those are the things that this year, above all, have given me the most comfort… and for those, I am grateful.

THE MARKETS

Stocks rallied to a mixed close yesterday.  The S&P500 climbed by +0.07%, the Dow Jones Industrial Average traded up by +0.38%, the Russell 2000 Index jumped by +0.87%, and the Nasdaq Composite Index slipped by -0.29%.  Bonds slipped and 10-year treasury yields added +3 basis points to 0.94%.

Vanguard's Value ETF (VOOV) added +0.80%, while its sister Growth ETF (VOOG) lost -0.42% in yesterday’s session.  This shows that investors were betting on a recovery, as value stocks tend to outperform as the economy emerges from a pullback.

NXT UP

- The stock market will close early at 1:00 PM EST today and will be closed for Christmas tomorrow.

- Next week will also be an abridged week for New Years but we will still get some housing numbers, weekly employment figures, and some regional Fed reports.  Check back on Monday for details and calendars.

daily chartbook 2020-12-24