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Things you need to know:

  • Who is Senator Joe Manchin? You are about to find out
  • The 2020 Election cycle is OVER – move on – Say goodbye, Donny.
  • The Senate is now evenly split – Kamala takes center stage
  • Nasdaq futures down 2% – Taxes and regulation at the core
  • Oil – pierces $50/barrel; demand up, Saudi’s voluntarily cut to goose prices
  • Gold up, Bitcoin up
  • Another new strain of Covid – say hello to 501.V2
  • Try the Sweet and Sour Chicken

Say hello to Senator Joe Manchin (@Sen_joemanchin) – Democrat from West Virginia – He has become the new face of the Senate…

And so it OVER… the 2020 election cycle is OVER… and it was the GOP’s to lose… and they lost – time to move on – Stacey Abrams is very proud of herself – and she should be – she was the one the lit the fuse in Georgia (and across the country) … US futures showing a big divergence… Dow futures are up 60 pts while Nasdaq futures are plunging… down 260 pts… or -2% – but remember – the Nasdaq soared 44% in 2020… so don’t go screaming FIRE in a crowded theater. The S&P? Off 13 and the Russell up 50! Mamma mia… what’s happening? Well, think massive infrastructure spending for the Dow names while more regulation and possible breakup for some of the big tech names (think FANG). Additionally – 10 yr treasuries have pierced 1% – and that’s good for financials (another reason we are seeing strength in the Dow (think GS, JPM both Dow components). And a new massive stimulus program here at home will benefit the US centric names – (think the Russell). All while the S&P remains confused!

Funny, but the talk this morning on CNBC is about higher interest rates… Wait – higher rates? Didn’t Jay Powell and a host of others tells us that rates will remain near zero for at least another 24 months? Oh… maybe not… and that was one of the points I made in Monday’s note… and if anyone is confused – higher rates will have an impact on investor psyche and ultimately market performance (at least in the short-term). Remember – Patience is a virtue.

European markets, which were struggling early on, have now decidedly turned higher and that is also interesting because the Europeans are going into lockdown across the region, never mind that former FDA Chief and CNBC analyst – Dr. Scott Gottlieb is warning the world that another ‘new’ strain’ of the corona virus found in South Africa – known as 501.V2 appears to be resilient to current therapeutics and he is pushing harder to get more and more people vaccinated before this latest strain appears across Europe and the US.

And while the Dems have flipped one of the two Georgia seats – as of 4 am this morning Warnock takes it from Loeffler, the other race is so unbelievably close to call… Osnoff vs. Purdue – right now it’s 50.2%/49.8%… I mean you can’t make this up… and that means that the Dem’s will have succeeded in taking the whole shebang!

And suddenly – Becky Quick – is talking about rising taxes – both Fed and Cap Gains… as if this is a surprise…

Yesterday the market ended the day higher (although off its intraday high, but still higher) … as more negative Covid news hit the tape… more angst, more lockdowns, more concerns yet the market marched higher attempting to take back what it lost on Monday and while it did not succeed in doing that – the tone was clearly a bit more positive, this after the media tried to convince us that Monday’s sell off was all about the virus!   NOT!

The chatter yesterday was the idea that investors (and thus the markets) are getting much more comfortable with a completely Democratic legislative branch… Why? Because Biden et al will open the spigots, give away even more money and launch massive infrastructure programs… $900 billion coming now and another $1 or $2 trillion coming before Tax Day in April. So celebrate now and then nurse the hangover when you wake up… all while the talking heads remain on the fence with some saying things like:

“S&P 4K before we see the pullback” – Chris Verrone, Strategas (Pullback not defined)

“S&P will tumble 20% BEFORE rallying to 4500” – Blackstone’s Byron Wein – so if Byron is correct – we will see the S&P tumble to 2,980 (from its current 3726 perch) only to rally 50% by year end to finish 2021 at 4500.  That would be a 2020 repeat performance!  So if that is the case – SELL everything right now and sit back and wait for S&P 2980… Go ahead, I dare you!

“The FED will hold rates near zero all the way out until 2025!”  and who do you think made this bold prediction??? One guess – HINT:  G……S….

And they (same group) are also betting that the S&P rises by 19% in 2021 taking us to ~4500 (give or take a point or two).  They go onto say that we can all expect the S&P to rise by another 7% in 2022!  That’s like saying – “Stocks will go up and then they will go down, and then they will go up again…”

In any event – yesterday’s macro data showed us that ISM Manufacturing was even BETTER than expected… coming it at 60.7!  That is well into EXPANSION territory… and that my friends was another reason for investors to celebrate… that report suggests manufacturing is alive (even as Covid targets the world) and well.

In any event – the Dow ended the day + 167 pts, the S&P’s added 26 pts, the Nasdaq rose 120 pts and the Russell – once again the big winner – gained 33 pts or 1.7%!

Look, everyone is waiting for a pullback and when it started to happen on Monday buyers jumped in, suggesting that they aren’t gonna wait too long… because the economy is expected to outperform in this new year… there is plenty of money that wants to be put to work, but many (myself included) are being patient – not avoiding, just being methodical –Remember – if you are invested in the market with a solid portfolio of names – you have nothing to worry about, and if you are waiting to jump – you have to start somewhere… so ‘dip’ your toe in the water and call your advisor to discuss. I would suggest that the uncertainty of what is to come is arguably more of an issue than what might actually happen – but that is not clear yet… so get ready for some near-term volatility and opportunity.

Eco data today includes: Mortgage Apps, ADP employment – exp of +75k new jobs created, Markit Services PMI – exp of 55.2 (bullish), Factory Orders of +0.7%, Durable Goods – exp of +0.9%, and the latest FOMC (Federal Open Market Committee) minutes at 2 pm.  Nothing really new is expected here.

OIL! Explodes higher… WTI (West Texas Intermediate) piercing $50/barrel… prices not seen since February 26th, 2020. There are two parts of the story here… one is the re-opening trade – and what is expected to be rising demand – and the other is that fact that UNTIL that happens, the Saudi’s have decided to voluntarily cut production by another 1 million barrels per day to help support prices. The trendline says that we should hit resistance right here, but don’t be surprised to see us test $55.50/barrel as the momentum trade kicks in.

Gold – which broke out on Monday – is attempting to challenge $2000/oz… and while right now it is flat at $1,955/oz – let’s see how it reacts once they call it.

Bitcoin – well… that’s up another $900 at $34,740. No need to discuss this – because if you talk to Mikey Novogratz – he can’t hire people fast enough to answer the phone calls from institutions that are going ‘all in’ on Bitcoin… with his 2021 year-end prediction of $500,000/coin.

The S&P closed at 3726 – as it struggles to understand what’s next. The trendline channel is wide – 3525/4050… that’s a 5% move lower vs a 10% move higher from here… and you know how I feel… Lower first, but not Byron Wein low… I am in the 5% – 7% camp for the downside… before we find stability which doesn’t mean I’m not invested – I am… and will continue to pick away at opportunities as they present themselves… It’s all about discipline.

Take good care

Kenneth Polcari
Consultant, Market Strategist

sweet and sour chicken

Sweet and Sour Chicken (Italian Style) 

You need: Chicken pieces – legs, thighs and breasts,   olive oil, s&p, diced onion, chopped carrots, chopped celery, plenty of sliced garlic cloves – 6+, ¼ c sugar, 1 c Chianti, ½ c red wine vinegar, ½ c orange juice with pulp,  *sliced almonds – optional.

Season the chicken pieces with s&p – set aside.  In a heavy frying pan – heat up some olive oil,  – now brown the chicken on all sides.  Remove and place on a platter.

Now add the garlic, carrots, celery, and onion – sauté for 10 mins on med heat….Now add the sugar, wine, vinegar, orange juice, and almonds….bring to a boil  – add back the chicken – skin side up.  Place a lid off center and turn heat to simmer.  Cook for about 30 mins.

Now remove chicken and place on a platter, – turn heat up to high and stir until it is nice and thick…not long…maybe like 4 mins max…..taste – adjust seasoning with s&p.  Spoon the sauce over the chicken pieces and serve.

This dish works well with a green veggie – like French cut green beans or broccoli.  Make a large mixed green salad with tomatoes, red onion and cucumbers.  Dress in a buttermilk ranch dressing.  Keep it simple

Buon Appetito.