Insights

WuRevue Week Ending 2/05/2021

Top News:

02/01: The Biden administration is reportedly meeting select GOP senators to bridge the $1.3T gulf between their respective recovery proposals.  Manufacturing in major economies, including US, China and EU, saw more tepid pace of recovery in January amid Covid-induced impediments. 

02/02: Encouraged by declining hospitalizations and increasing inoculations, investors pushed US indices higher, focusing on earnings and recovery prospects.  While Eurozone’s 4Q GDP figures contracted less than anticipated, short-term prospects remain clouded by the bungled vaccine rollout.

02/03:  A whole raft of upbeat earnings reports in the US and on the Continent emboldened investors focused on the economic narrative.  Optimism was further warranted by a surprisingly strong monthly payrolls report in the private sector, in addition to encouraging vaccine efficacy news (here, here).  This recent stream of steady progress against the pandemic, coupled with the promise of more federal aid, contributed to an expansion of the US services sector in January. Meanwhile, Yellen will reportedly meet with market regulators to discuss heightened volatility driven by retail trading.  In Asia, China’s services sector expanded at the weakest pace for nine months in January, evidencing an economy’s vulnerability to impromptu Covid restrictions. 

02/04: Investors took some comfort in both the latest unemployment claims tally, which dropped for a third straight week, and the ongoing largely positive earnings season. The British pound surged after the BOE eased concerns that the central bank might be considering negative interest rates. 

02/05: Hinting at a long road ahead to full employment, US saw slightly fewer jobs added than expected in January.  US Senate voted to fast-track the administration’s $1.9T recovery bill, even if details will likely change after negotiations.  A single-shot vaccine candidate has been submitted to the FDA for approval.

Heard on the Street:

“The vaccination process appears more complicated than anticipated, falling short both in terms of timing and distributions.  As well as new developing risks of additional variants of the disease, the economy may face a bumpier, longer pathway back to some semblance of normal.”

— Lindsey Piegza, chief economist for Stifel, as quoted by MarketWatch on 01/30/2021

“I do believe that [low] interest rates as well as [stimulus] payments and boredom are causing investors to be striving after companies that really don’t have the fundamental underpinnings.  That could end up being a fairly negative situation for many of the investors left holding the bags.”

— Sam Stovall, CFRA’s chief strategist, as quoted by CNBC on 02/01/2021

Longer Game:

Will automation spell the end of US labor?  Highlighting how the asymmetrical taxation between labor and capital since the 80’s has intensified income inequality and distorted investment and employment decisions, one group of academics argues corporate tax reform is a critical first step in eliminating incentives for excessive automation while encouraging “labor-complementing” technologies.

Bonus:

Contrary to vox populi driven by hunches as well as political rhetoric primed solely for short-term gains, a working paper found “no indication that minimum wage has a negative effect on the unemployment rate, on the labor force participation, or on the labor market transitions,” according to its examination of data from 1979 – 2019.

WuRevue Week Ending 1/29/2021

Top News:

01/25: Tough negotiations between the administration and Congress have begun on additional fiscal support.  A measure of German business confidence declined more than expected in January, due to heightened restrictions weighing on outlook.

01/26: Asian markets were spooked by speculation that China’s central bank may be shifting its monetary policy.  The IMF modestly raised its 2021 global GDP growth forecast to 5.5%, predicated on a vaccine-driven recovery.  Mirroring this forward-looking mentality, one gauge of US consumer confidence improved in January, albeit ever so slightly.  Meanwhile, UK’s latest unemployment rate rose to the highest level since 2016.

01/27: US indices tumbled to session lows, after the FOMC underscored the challenging road ahead, following its first policy meeting of 2021.  The administration is ramping up the vaccine rollout, along with a flurry of executive actions aimed at bolstering the nation’s Covid response. Despite slower growth in new orders, US manufacturing demonstrated continuing resiliency in December.  Consumer confidence in Europe’s largest economy declined in January due to its extended lockdowns.  Additionally, bond investors are closely monitoring EU’s reportedly forthcoming revision of member states’ 3% and 60% deficit and debt thresholds.

01/28: 4Q GDP growth in the US moderated to 4%, resulting in the worst single-year performance of -3.5% since 1945.  This fading momentum in recovery was also evident in another economic index that measures U.S. business cycles in December.  Though hardly a cause for celebration given the persistently high levels, the latest weekly unemployment claims report proved marginally better than expected.

01/29: Sustained volatile trading in a small batch of heavily shorted companies sparked concerns over a speculative bubble in the wider market. Concurrent with the weakening of US consumer spending in December, the core PCE index (the Fed’s preferred measure of inflation) rose at an unremarkable clip of 1.5%. 

Heard on the Street:

“There’s way too much leverage in the system, and we’re starting to see signs that this excess leverage is going to be unwound in a way that will create headwinds for the stock market and other risk assets for more than just a few days.”

— Matt Maley, chief market strategist at Miller Tabak, as quoted by CNBC on 01/28/2021

Longer Game:

While acknowledging that he was “thrilled” with Biden’s inauguration speech, Ray Dalio, who heads the world’s largest hedge fund, remains less than sanguine about bridging divides, noting, “Good words and spirit aren’t enough. People will have to agree on both how to grow the pie and how to divide it well. That will require revolutionary change.”

Bonus:

NIH’s Dr. Fauci provided a wide-ranging update on the current war against the coronavirus.  Meanwhile, one US biotech firm announced its late-stage vaccine candidate is effective against new coronavirus variants, while another pharma’s single-shot vaccine appeared less efficacious than hoped.  On the treatment front, encouraging trial results of two monoclonal antibody cocktails have also been reported (here, here). 

WuRevue Week Ending 1/22/2021

Top News:

01/18: Marking the first year in which China’s GDP expanded beyond 100 trillion yuan (US$15.4 trillion), the world’s second largest economy eked out a 2.3% growth in 2020, in stark contrast to other major economies.

01/19: Treasury Secretary nominee Yellen championed Biden’s fiscal stimulus plan and her commitment to a “market-determined” US greenback, in lieu of a strong dollar, at her confirmation hearing. The IEA lowered its 2021 daily oil demand as fresh lockdowns are expected to weigh on consumption.

01/20: Each of the major US indices closed at record highs, following Biden’s inauguration as the 46^th president.  The new administration is slated to issue executive actions on a wide spectrum of issues, ranging from pandemic relief, to immigration, to climate change.  In a study yet to be peer-reviewed, the Pfizer/BioNTech vaccine was found likely to be effective against the more transmissible UK variant, even as questions linger regarding efficacy against some mutations. UK inflation remained a distant concern, though it registered a higher jump in December.

01/21: The administration released its pandemic action plan, including invoking the Defense Production Act. On the data front, the latest weekly jobless claims saw slight improvement; additionally, December housing starts soared at the quickest pace since 2006. On the Continent, the ECB left its accommodative policy and bond-buying program unchanged.  In Asia, investors cheered Japan’s export sector, which grew for the first time in two years in December.  Meanwhile, Japan’s central bank raised its annual GDP growth forecast modestly to 3.9%, while standing pat on its monetary policy, similar to other major global peers.

01/22: Heightened virus worries worldwide (here, here) prompted some profit-taking, following recent market highs.  Compounding investor worries were data that showed economic conditions in the Eurozone worsened in January, prompting some chatter of a double-dip recession.  In contrast, the latest existing home sales report confirmed US housing remained a bright spot.

Heard on the Street:

“Right now the bond market is starting to say we’re going to start seeing rising inflation, we’re going to have a more robust economy in six to 12 months.  And if the forward curve of the bond market is correct, one could expect in nine months or 12 months at the very least, the Federal Reserve and other central banks starting to re-evaluate their monetary policy.”

— Larry Fink, CEO of BlackRock, as quoted by MarketWatch on 01/19/2021

Longer Game:

Is China’s renminbi poised to overtake the US greenback as the world’s reserve currency?  Not so fast, said two scholars, who believe the dollar’s resilience can be attributed to “all of the intangible qualities that underpin investor confidence – not least a strong banking system backed by a reliable sovereign.”

Bonus:

As of mid-January, a solid majority of institutional investors believed some financial markets, including bitcoin and U.S. tech shares, are in bubble territory, according to a Deutsche Bank survey of 627 market professionals.  Moreover, margin debt—the amount of leverage investors use to speculate—reached a historical high of $778 billion at year-end.

WuRevue Week Ending 1/15/2021

Top News:

01/11: Recognition that the market has gotten complacent on risks prompted selling in US equities, amid political upheaval, stalled vaccination rollout, and rising interest rates.  UK financial regulators warned consumers against investing in cryptoassets.

01/12: Amid the flurry of political news, US topped 22 million Covid cases, though the global situation remained no better, especially in Europe.  Small businesses turned more pessimistic in December than at any time since the onset of the pandemic, further illustrating challenges faced by Main Street.

01/13: One short-term worry was removed as the core CPI remained below the Fed’s 2% target, rising at an annual pace of 1.6% in December.  The Fed’s latest Beige Book showed that economic activity increased “modestly,” while the prospect of COVID-19 vaccines has bolstered business optimism.  After the UK regulators’ earlier warning, ECB President Lagarde also views bitcoin as a “highly  speculative asset” requiring global regulation.

01/14: Markets took the unprecedented second impeachment of a sitting President in stride, focusing instead on Biden’s reportedly $2T recovery plan.  Confirming the need of additional support, initial weekly jobless claims rose above expectations.  Due to this slack in full employment and the shortage of demand in major economies, Fed Chair Powell noted rates will continue to be accommodative. Separately, interim data published in a peer-reviewed journal suggest J&J’s single-shot adenoviral-vector vaccine looks promising.

01/15:  Renewed restrictive Covid measures led to a consecutive drop in US retail sales in December.  Meanwhile, one measure of wholesale prices showed inflation was not an immediate concern.  A preliminary measure of consumer sentiment dipped slightly in January, stabilized by vaccine hopes and stimulus prospects.  While snapping a streak of six consecutive monthly increases, UK’s GDP contracted less than expected in November. 

Heard on the Street:

“The first half of this year, the blue wave will probably continue to be bullish… In the second half of the year, we may be on the lookout for some consumer price inflation which would not be good for overvalued assets… We do see upward pressure on the bond yield. I think at some point the Fed says ‘Maybe bond yields should be higher since the economy is doing well.’”

— Edward Yardeni of Yardeni Research, as quoted by CNBC on 01/10/2021

“The equity market’s ability to rally decisively in the face of the tragic events at the Capitol on 1/6, the virus’ escalation, a poor employment report and rising yields confirm that a new, more speculative, more volatile phase of the bull market has begun… The depth of any such pullbacks in 2021 is largely dependent on yields.”

— Julian Emanuel, BTIG’s chief equity and derivatives strategist, as quoted by MarketWatch on 1/12/2021

Longer Game:

Both the incoming national security advisor and rumored Indo-Pacific czar charted a course for US-Sino coexistence, involving elements of competition and cooperation.

Bonus:

PIMCO, the world’s largest money manager, cautions against “excessive optimism” over the next 12-18 months for three reasons: 1) curtailed fiscal support as governments face ballooning budget deficits; 2) Beijing’s challenge in striking a balance between reducing credit growth and supporting businesses; and 3) a “difficult market environment” once the “easy pandemic recovery trades have played themselves out.”

WuRevue Week Ending 01/08/2021

Top News:

01/04: Following recent market highs, stocks swooned as investors took profit ahead of ample political anxieties anticipated in the US (here, here).  A South African coronavirus variant with increased transmissibility is sparking concerns over whether existing vaccines will prove equally effective.

01/05: One gauge of US manufacturing revealed better than expected growth in December, supported by new orders, production, and employment.  The price of crude oil jumped in the wake of the announcement by OPEC+ to cut production.

01/06: Viewing the unprecedented takeover of the Capitol as irrelevant to earnings and economy, Wall Street focused instead on fiscal support from a more sympathetic Democratic ruling “trifecta,” now that its Senate control appears sealed.  An indicator of US private payrolls dropped unexpectedly in December.  Additional flashpoints in US-China relations arose after a Chinese security dragnet detained over 50 progressives in Hong Kong.

01/07: Recent market rally continued after the US Congress certified the Biden/Harris victory.  Meanwhile, weekly unemployment claims reaffirmed the unlikelihood of improvement until the pandemic subsides. Flip-flopping for a second time in less than a week, the NYSE is proceeding with the delisting of three Chinese telecoms, with Alibaba and Tencent also rumored to be targets.

01/08: December marked the first month in which US saw job losses since last April, with leisure and hospitality bearing the brunt of cuts.  Incoming Biden administration is reportedly considering an additional $3 trillion in fiscal stimulus in direct household payments and infrastructure upgrades, potentially accelerating inflationary pressures.  Initial research suggests the Pfizer-BioNTech vaccine appears effective against new coronavirus variants.

Heard on the Street:

“If we try to fine-tune a very modest inflation overshoot of only a tenth or two, we run a very large risk of failing to achieve our 2 percent averaging goal within any reasonable amount of time. For me, getting inflation moving up with momentum and delivering rates around 2-1/2 percent is important for achieving on our inflation objective in as timely a manner as possible.”

— Charles Evans, Chicago Fed President and FOMC voting member, in a speech on 01/04/2021

“Democrats picked up both Georgia Senate seats, paving the way for Biden to implement his agenda more broadly… We are going to have the largest stimulative event in the history of the planet in the second half of this year…and there’s all this pent-up demand.”

— Jonathan Golub, Credit Suisse equity strategist, as quoted by MarketWatch on 1/07/2021

Longer Game:

However tempting it may be to dismiss the events of Jan. 6 as a “beer belly putsch,” lasting damages have been inflicted upon the self-image and worldwide standing of the US.  One commentator from MIT believes the key to understanding those responsible is their disposition towards “right-wing authoritarianism,” which defies traditional demographic boundaries.

Bonus:

Spurred by loose monetary and fiscal policies, the US equity market has been on a upward channel since April.  While it may be unfashionable to hear from those less sanguine, it’s more important than ever to do so in order to maintain a balanced perspective and avoid the groupthink trap of excessive euphoria. 

WuRevue Week Ending 01/01/2021

Top News:

12/28: Avoiding a government shutdown and providing additional Covid assistance, the Administration signed the $2.3T spending and recovery bill, despite earlier posturing to the contrary.  Another significant near-term market headwind was lifted as well, when the EU-UK clinched a Brexit deal on Christmas Eve, after four years of talks.  US holiday retail sales, driven by online commerce, saw an annual growth rate of 3%, according to one estimate.

12/29: A quarterly private survey of Chinese businesses showed a tepid outlook as roughly two-thirds polled said they do not expect a return to 2019 levels until at least three months from now.  Driven by demand as a result of record low interest rates, home prices in 20 large US cities rose at a 7.9% yearly pace in October.

12/30: The UK approved the joint vaccine developed by AstraZeneca and University of Oxford, the third to receive the greenlight after peer reviews.  China reached an investment agreement with the EU, even if some question its substantive economic impact.

12/31: Decelerating modestly in December, China remains on track to be the only major economy to show positive GDP growth in 2020.  Latest weekly initial and continuing jobless claims decreased, yet they remain at elevated levels when compared with the year-ago period. Hiccups in the rate of vaccination amplified concerns over reports of the more contagious UK variant in the US.  Prolonging the long-running dispute over subsidies to aircraft manufacturers, US ratcheted up tariffs on $7.5 billion worth of European products. 

Heard on the Street:

“Market historians looking back to another incredible year – 1999 – in which the S&P 500 closed the year at a new all-time high, will recall that the initial few days of the year 2000 saw a vicious correction. Yes, times were different, and the focus then was on Y2K and the concentrated bubble of the time, but investors need a reminder that even during major bull market runs, one can see significant set-backs.”

— John Hardy, Head of FX Strategy at Saxo Bank, in a market update on 12/28/2020

“To be frank, buying gold or silver is not a contrarian investment position today… There are enough people in agreement with the idea that all government backed fiat currencies are doomed to some level of devaluation through inflation due to the level of fiscal and monetary imprudence and unsustainable debt imbalances in the financial system.”

— Kevin Smith, CIO of Crescat Capital in its December note

Longer Game:

How should the US and EU deal with China’s technological rise?  Hank Paulson’s think tank highlighted areas of cooperation in order to support “liberal democracy” and blunt “rival systems of digital governance”: 1) building a shared digital infrastructure; 2) harmonizing export control of sensitive technologies; and 3) connecting the developing world with the US-EU ecosystem of standards. 

Bonus:

In its December survey of 984 global market professionals, Deutsche Bank found issues relating to Covid, tech valuations, and premature withdrawal of government stimulus programs as their top concerns in 2021.

WuRevue Week Ending 12/25/2020

Top News:

12/21: A new Covid strain with higher transmissibility discovered in the UK, as well as the worsening situation in California, overshadowed a tentative agreement on a $900B fiscal relief bill in US Congress.  In a surprising move, the Fed greenlighted the resumption of limited share buybacks by banks, following the conclusion of its latest stress-testing of capital adequacy.  With hope dimming for a deal by year-end, Brexit negotiations mired in deadlock compounded investor worries. 

12/22: After months of delay wrought by inaction and partisan wrangling, Congress formally passed a second coronavirus relief package.  This development could not have happened sooner, given a reading of consumer sentiment in December stumbled unexpectedly to the second lowest level since the pandemic’s onset.  Owing to a tight inventory and rising median prices, existing home sales saw a monthly dip in November, after a record October.

12/23: The Administration signaled its dismay with the veto-proof Covid recovery bill, part of a bigger government spending legislation.  Meanwhile, US economic data were decidedly mixed: positives in the form of the weekly unemployment claims report and durable goods order are juxtaposed against the erosion of consumer sentiment in December and decline in the latest monthly personal income and spending report.  On the vaccine front, AstraZeneca/Oxford’s candidate should be approved in the UK “pretty shortly,” while Merck signed a deal with the US government for its experimental coronavirus therapy.

12/24: With the EU and UK reportedly close to a Brexit deal, all eyes will focus on whether any agreement can be even provisionally ratified, prior to the year-end cliff.  China launched an antitrust investigation into Alibaba, prompting concerns of heightened regulatory scrutiny for other tech giants in the near-term.

Heard on the Street:

“We see emerging market equities and U.S. small cap as having additional upside where a lot of those… early economic cycle benefits are not fully priced in… we would encourage our clients to be looking through any short-term volatility because that is, at the end of the day, a normal part of investing.”

— Meghan Shue, head of investment strategy at Wilmington Trust, as quoted by MarketWatch on 12/21/2020

“You’ve got to hold more cash because you don’t have as fulsome a parachute as you had before… A big deal for asset allocation going forward is making sure you’re getting what you need from equities, especially when interest rates are this low.”

— Rick Rieder, CIO of BlackRock’s Global Fixed Income, on the relative risks of bonds vis-à-vis other asset classes

Longer Game:

As families celebrate the holiday season, in however modified fashion, one European observer offered at least five reasons to be hopeful as we head into 2021!

Bonus:

While noting he’s “scientifically confident,” the CEO of BioNTech said it would take about two weeks to confirm whether its already approved joint vaccine with Pfizer is effective against the new UK strain of coronavirus.

HAPPY HOLIDAYS from JACKSON HEIGHTS; MAY the NEW YEAR BE the DAWN of MANY AUSPICIOUS TIDINGS for ALL!

WuRevue Week Ending 12/18/2020

Top News:

12/14: Electoral College meetings where Biden will be chosen formally as president garnered attention, given the spat of lawsuits challenging results.  In a memorable first, Pfizer began distributing its vaccine, a welcome development as the coronavirus situation worsens.  Japan’s quarterly business sentiment improved more than expected, though a hazy outlook should spell no change in its ultra-loose monetary policy.

12/15: Investors took comfort in the first “meaningful conversation” between the top four congressional leaders in months, following the unveiling of a two-part recovery proposal by bipartisan lawmakers.  Separately, China extended its strong economic momentum in November with an across-the-board recovery.

12/16: Despite revising its economic projections higher, the Fed kept rates near zero as well as signaled the highly accommodative stance will likely remain through 2023.  Underscoring the need for additional fiscal support, November retail sales posted a sharper than anticipated decline of 1.1%.  Preliminary December data suggest growth deceleration among private US and Japanese businesses, while those in the Eurozone and the UK saw slight improvement.

12/17: US weekly unemployment benefits report highlighted the labor market’s fragility as total first-time claims rose to the highest level since early September.  Meanwhile, anchored by the Fed’s loose stance, homebuilding and permits increased solidly in November.  A FDA advisory panel is slated to recommend emergency authorization of a second US vaccine, which the agency has already deemed “highly effective.”  In the UK, BOE stood pat in its monetary stance, choosing to await results of Brexit negotiations prior to unleashing additional money stimulus.

12/18: Investors took their feet off the pedal given the unresolved political stalemate in US Congress (here) and Brexit (here).  As another indication of moderating US economic growth, an index of leading indicators inched higher at the slowest pace in five months in November.

Heard on the Street:

“Admittedly (price-to-earnings multiples) are high.  But that’s maybe not as relevant in a world where we think the 10-year Treasury is going to be lower than it’s been historically from a term perspective.”

— Jerome Powell, Fed Chairman, in post-FOMC news conference as quoted by CNBC on 12/16/2020

“As far as an EU-U.K. trade deal is concerned, it would appear that fishing rights are the last significant obstacle for an agreement to be put to the U.K. parliament sometime in the next week or so, with reports of talks entering a ‘tunnel’ helping the upbeat mood.”

— Michael Hewson, chief market analyst at CMC Markets, quoted by MarketWatch on 12/17/2020

Longer Game:

As we look ahead to 2021, one market analytics firm highlighted key macroeconomic themes, including: 1) wide availability of vaccines by mid-year spurring GDP growth in second half of the year; 2) continuing accommodative stance of developed countries’ central banks; and, 3) US dollar depreciation vs. major currencies.

Bonus:

Interested in bitcoin, the latest flavor du jour?  You may want to read this report, prior to buying into the notion that this cryptocurrency is “Gold 2.0.”

YEAR-END THOUGHTS, PART 2

On a recent social Zoom call, a friend offered a stark reminder of the scope of this pandemic’s tragedy— total US Covid deaths are now more than 100 times the fatalities suffered on 9/11.  As a fellow New Yorker present in the City at that time, I had to take pause, unsure whether anyone can ever fully appreciate the impact on over 300,000 families across this country. It seems our daily compass vacillates between a collective sense of sadness and one of nagging frustration with recalcitrant attitudes towards public health measures.  Compounding this mental fog, the nation’s ongoing political discord has proved difficult for most to ignore.

Given this onslaught of unprecedented factors, it is not surprising that one may fall prone to cynicism and inaction.  To break with this loop of unproductive feedback, I believe a reorientation towards an internal locus of control is critical.  Indeed, a renewed perspective is essentially the “holy grail” of my year-end meetings with clients—focusing on retooling financial variables within their control, after listening with deliberate intent about their worries and wishes.

So, what should be on this “call-to-action” list as we look towards the New Year? 

• Protection: On top of the thorough review of estate planning documents referenced in Part 1, 2020 illustrates moreover the importance of having various types of insurance to hedge against unforeseen risks;
• Cash Flow: In a year when millions have lost employment, it pays to ensure the adequacy of the “rainy day” account, and to reassess monthly expenses vs. income. Only when there is positive cash flow can one hope to build assets;
• Taxes: In addition to the usual tax-loss harvesting exercise at year-end, tactical and strategic planning opportunities may exist as a result of the 2019 SECURE Act (e.g., how to mitigate the required 10-year distribution rule for non-spouse beneficiaries of tax-deferred retirement accounts), and 2020 CARES Act (e.g., for those who took distributions or loans from retirement plans as a result of Covid hardships);
• Growth: Given the market’s gyrations, it is also essential to examine whether the overall asset allocation has deviated from your appropriate positioning such that these accounts warrant rebalancing;
• Charity: Taxpayers can take advantage of a one-time “above-the-line” deduction of up to $300 for cash donations to eligible charities, in 2020, and consider donating appreciated stocks to minimize capital gains. For those interested in engaging in philanthropy on a sustained basis, one increasingly popular vehicle is donor advised funds. 

Happy Holidays, and, in the inestimably motivational words of Grandmaster Yoda:

“Do. Or Do Not. There’s No Try.”

WuRevue Week Ending 12/11/2020

Top News:

12/07: Reality is sinking in as EU-UK stand on the precipice of a messy “no-deal” Brexit deadline of December 31^st.  In contrast, China’s exports in November grew at the fastest pace in almost three years.  However, investor enthusiasm was restrained given the US is reportedly preparing more sanctions, in response to China’s further restrictions on Hong Kong’s autonomy.

12/08: Peer reviewed data showed the most promising European vaccine to be safe and capable of preventing disease, though some questions remain.  In a prelude to this Thursday’s meeting of outside experts, the FDA released briefing documents supporting the efficacy of the Pfizer/BioNTech vaccine. 

12/09: Investors endeavored to read the tea leaves on Congressional fiscal aid, for there are now no fewer than four proposals floated as opening gambits in time-sensitive negotiations. The FTC and a coalition of 48 states filed separate antitrust lawsuits against Facebook, spurring profit-taking in tech shares.  Faced with the waning probability of a Brexit deal, leaders of UK and the EU are making a last-ditch attempt at compromise. 

12/10: US weekly unemployment claims report telegraphed a weakening labor market.  As another sign the economy still has more room to reflate, November’s CPI continued to be below the Fed’s target of 2% on a sustained basis.  The House passed a stopgap funding extension, trying to buy time to strike a broader spending and coronavirus relief bill.  The ECB upped the size of its monetary stimulus scheme by €500 billion and extended its expiration until March 2022.

12/11: While Congress remains deadlocked on stimulus, November’s wholesale prices suggest a challenging near-term economic recovery. On the upside, however, came FDA’s imminent approval of its first vaccine, as well as an unexpected uptick in consumer sentiment in early December, due to a “more favorable long-term outlook.”  In Europe, investors were unnerved by vaccine development setbacks (here, here) and pervasive resignation to a “no-deal” Brexit (here, here), despite EU’s tentative agreement on a sizable €1.8T budget and recovery package

Heard on the Street:

“Stimulus checks are really popular and really effective. There is more and more research coming out that dollar for dollar people spend this. If people spend money, businesses have money, and then they don’t have to lay off people.  [November’s] jobs report is the straw that broke the camel’s back…On top of that, the economic data says [sic] this is really going to get worse so it comes down to how can [lawmakers] not act?” 

— Claudia Sahm, former Federal Reserve economist, quoted by MarketWatch on 12/7/2020

Longer Game:

Labeling “sustainable development” as “our generation’s moonshot mission,” one Columbia professor laid out a blueprint of a public-private partnership worldwide in order to chart collaborative pathways to success.

Bonus:

Is current investor sentiment already too bullish?  According to one poll of active investment managers, their mean exposure to US stocks is at the second highest reading since the survey first began in 2006.  The highest level occurred in December 2017, which was followed by a 12% correction in January 2018.