Friday, December 21, 2018

Quote of the Day: Logical Optimism (and the silver lining to Wednesday's Fed move)

The underlying data (slowing growth, yet still low recession risk) makes, per the following, for some upside risk for the market heading into 2019 (no guarantees of course):
"Global stocks, as proxied by the MSCI World Index, are heading for their worst December on record. The dollar is also set for its biggest December loss against the euro since 2015. Some investors, including UBS, drew a parallel to the 2015-2016 episode when the Fed wasn't early enough to identify risks of tightened financial conditions. That later forced the Fed to take a long pause on rates. That similar inflection point has probably arrived. If that happens, risk assets including stocks should have decent room for gains. After all, key data are not pointing to an imminent recession."
Anchalee Worrachate Markets Reporter
I would add that an early-year alleviation of the U.S./China issue would be hugely bullish -- in fact absolutely necessary if the bull market is to continue -- as well. 

Ironically, the market's disappointment over the Fed's move on Wednesday contains an all important silver lining: it increases the incentive for a trade deal -- which would essentially establish a markedly more bullish setup going forward: I.e., renewed optimism resulting from a trade truce will be met with a more accommodative Fed. That's a compelling recipe for higher stock prices... We'll see...

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