It was so quiet in the markets yesterday, that there isn’t even a story about stocks on the front page of the WSJ… zero, zip, nada. That goes straight to the point. It is year end, stocks have done extremely well this year, investors are happy, economic data in the US and around the world has NOT deteriorated (as so many had expected). Central banks have continued to support the markets with ultra-low (and negative in some spots) interest rates, inflation in the developed world remains well under control. Technology continues to improve the quality of life for so many, energy (oil) appears to have stabilized and remains in what some suggest is fair value, while others (OPEC and OPEC +) remain frustrated.
In the US, unemployment is at “historic” lows, interest rates are at “historic” lows and the stock market is at “historic” highs. The US has forged a new trade agreement with our own neighbors: Mexico and Canada, to be voted on today. We have apparently forged an agreement (in principle) with China. So Merry Christmas!
Volumes are beginning to weaken as we approach the end of the year, Europe is already in “holiday” mode and we are just two days away from the “holiday” week. The VIX (volatility index) is at “historic” lows and unless we get hit with something out of left field. No one expects the market to decline or advance much from here before year end. By the end of the day, the Dow was off by 27 points, the S&P was down by 1 point, the Nasdaq was up 4 points, and the Russell advanced by 4 points.
With little economic or trade news yesterday, investors were drawn to their TVs to watch what was being described as an “Historic Day” in the United States. The Democrats in the House succeeded in their push to formally impeach President Trump, an effort that began soon after he moved into 1600 Pennsylvania Avenue. In fact, if you remember the now famous Washington Post Headline dated January 20, 2017, on the day of his inauguration, foretold what was to come:
“The Campaign to Impeach Trump Has Begun”
But then the effort was about his real estate, Trump Hotels and golf courses. Funny how the effort continued for three years but has now turned to his conversations with Russian and Ukrainian leaders. We all know the story, no need to re-hash it. But in the end, yesterday’s “historic” day appears to have done little to bring any closure to this divisive argument. In fact, I would argue it has only ignited more division. It appears to have done very little to how investors view the investing environment. So much for the “historic” day.
As expected, the votes and the commentary fell along party lines, which only makes this issue that much more political, and this will be the issue now for the coming presidential election cycle. The Democrats have set the stage and made a choice. How will the electorate respond? That depends on who the candidates are. If Lizzy or Bernie rise to the top, then expect the market to sell off as they pick your pockets and threaten to break up the pharmaceutical, the technology, and the energy industries and impose a tax structure that will surely cripple innovation. If we get a more moderate “center” candidate, then maybe not so much. But who will that be?
Let’s be clear, investors here and abroad do NOT care about impeachment. This process is noise to them and THAT is clear by the markets action. Look at what the market has done. It has advanced by 18% (after making up the 13% drop suffered last December when the markets went into sell mode over FED policy), suggesting that investors do not care about Trumps conversations. But what they do care about is Trumps economic policies that have allowed companies to thrive and flourish. Period.
This morning we find that global markets continue to churn, albeit a bit lower. But that is nothing more than consolidation after the surge over the trade deal. The BoJ (Bank of Japan) left rates unchanged. That’s no surprise while Australia reported a 40k increase in jobs, much better than the expected 14k.
In Europe, investors there are waiting for interest rate decisions from the BoE and the Riksbank (Sweden central bank). The BoE left rates unchanged while Riksbank took rates out of purgatory. They ended five years of negative rates and after today’s decision has brought repo rates to 0.0%. Queen Elizabeth is due to outline the UK government’s plans today after BoJo and the conservative party won a significant majority in the election. Eurozone PMI and individual country PMI’s – Spain, Germany, Italy, and France are all due out during the day.
US futures are up. Dow futures +28 points, S&P, Nasdaq, and Russell are all flat.
Economic data includes Philly Fed – exp of 8, Init Jobless Claims of 225k, Init jobless claims of 1.676 and existing home sales – expected to drop by 0.4%.
The S&P closed at 3191 and will most likely try to pierce 3200 in the days ahead. If nothing changes I think it fails. Barring any negative news, the range appears to be 3140/3200.
Oil holding its own bouncing between $60.50 and $61. Reports of falling US inventories giving it the latest boost, but understand, week-to-week is one thing, but the broader trend is another and the broader trend suggests that we have plenty of oil. I still believe the range will be $55/$65 for the coming year, unless everyone just stops producing, then we could see $100/barrel fairly quickly.
Gold continues to hover at $1480/oz. Just below resistance at $1487. Unless there is some fallout over trade, I suspect that gold will stay put. If the deal is what they say it is, then watch as gold backs off to test $1450/oz.
Take good care
Here is a quick and easy holiday recipe that I got from my friend Scott. It works well as a gift. You know put them in a mason jar and put a bow on it! Just like they do in those Lexus commercials. Or just to have on your table.
You can use them on a range of dishes, breakfast cereals, salads, desserts.
For this you need – 3 large egg whites, 1 cup white sugar, 1 tsp cinnamon, 4 cups pecan halves, ½ cup melted butter.
Lightly whip the egg whites, add sugar and cinnamon and pecans and blend. Pour the melted butter on the baking sheet, spread the pecan mix on top and spread out. Bake about 30 minutes turning every 10 minutes at 350 degrees.
Remove and let cool.