Direct flights from Honolulu to Anchorage

Stocks rallied on Friday after Fed Chair Powell could not convince traders that he is still a hawk. And… that’s a wrap for Fedspeak ahead of next week’s final 2023 policy meeting as policymakers rest the vocal chords… for a change.

Disobedience. One time, not too, too long ago a colleague walked into my office as I just leaned into one of my many, many screens and commanded “stay.” He asked, “did you just do what I think you did?” I am not sure I remember all the details about the markets that day, but I vaguely recollect that there had been a spate of painful down days, and the market was attempting to pick itself up, build a base, and fight back. I looked at the clock and realized that we were in the no-man’s land where anything could happen. That is the time when frustrated traders close up shop and head to the gym (or the bar) while the winners begin to count their gains, pat themselves on the back, and multiply their daily profit by 260 and dream (which, by the way, is the quickest way to doom and destruction).

All that is the equivalent of falling asleep at the switch. When those conditions exist, a well-placed hedge fund algo trade could send the market into a frenzy quite easily, as half asleep traders, late to the party, rush in to salvage what’s left of their profits, or attempt to double down. On that day, where the smell of fear still wafted across the well-worn floors of the stock exchange, exposed nerves could easily cause a late-session selloff. So, I decided to try to help the situation by commanding the markets to “stay,” which always seemed to work for my dogs. I did it, not for myself, but for all investors, everywhere, who I decided, needed a break from the selling. By now, you may be wondering if it worked.

Now, I am not sure, but I think that last Friday’s session produced the highest close of the year. Markets did venture slightly higher in late July, mid-session, but Friday’s close looks like the record close. This, on a day when Fed Chair Powell let us know that the Fed would not hesitate to raise rates further if necessary… during the same speech in which he admitted that interest rates were at highly restrictive levels. The market took that as a not-hawkish exchange, and carried on with the rally.

After the intra-day 2023 high on July 27^th, markets gave up almost -11% by the end of October. Since then, markets have made it all back… in just over a month. To be clear, all the gains were for good reason. The majority of recent economic numbers suggest that inflation continues to moderate, the economy is resilient, and companies, for the most part, are doing… well, ok. So, now we have supportive market action along with supportive economic numbers. This appears to be a perfect set up for a Santa Claus rally.

If you are so inclined, you can see all of my daily posts going back to 2018. I keep them up so you can check and see all of my missives - right and wrong - and get a good idea of what I am all about. It is almost like sharing my personal diary. If you aren’t inclined but you are a regular reader, you know that I quite often repeat the term that “the market rarely does what is convenient for you at the moment.” I use that term to remind people that the market is errant and often behaves like a wayward, non-conformist child. It is, indeed, a warning to prompt people to be thoughtful about their investment decisions. Indeed, the markets look enticing, but that does not excuse one from the very necessary diligence that makes for a successful investor. Now, more than ever, investors need to remain disciplined in their approach. Year-end is nigh, and many fortunes are lost in these fleeting final weeks, so pay close attention. I would be happy to command the market to “stay,” but I know that it probably won't work, because it certainly didn’t on that day when my colleague caught me doing it last time.

WHAT’S OBEDIENT AND DISOBEDIENT THIS MORNING

Alaska Air Group Inc (ALK) shares are lower by -11.93% in the premarket after it announced that it agreed to buy Hawaiian Holdings for $1.9 billion. Raymond James downgraded the stock to MARKET PERFORM from STRONG BUY in response to the announcement. Alaska, in forward PE, is richer than its comps. Potential average analyst target upside: +25.6%.

Lululemon Athletica (LULU) shares are lower by -2.05 in premarket trade after Wells Fargo cut the stock to EQUALWEIGHT and removed it from its “Top Picks” list. Wells replaced Lululemon with Nike on its picks list. . Potential average analyst target upside: -6.2%.WHY IS THIS NEGATIVE? Because its current price is above the mean target price of analysts. While this can be interpreted as the stock’s being rich, that does not mean that it will not continue to climb.

FRIDAY’S SESSION

NEXT UP

• Factory Orders (Oct) are expected to have declined by -3.0% after gaining +2.8% in September.
• Durable Goods Orders (Oct) may come in at -5.4% in line with prior estimates.
• The week ahead will feature JOLTS Job Openings, ISM Services Index, ADP Employment Changes, University of Michigan Sentiment, and the monthly employment report. Download the attached calendar for times and details.