Wednesday, December 19, 2018

Today's Log Entry

Thought I'd share this morning's entry to our market journal (where I essentially record my thoughts on the current state of general conditions). This morning I pretty much, in brief fashion, touched on the main global issues of the moment:

12/19/18 (Wed)

The Fed wraps up today… The setup is for an oversold rally as shorts cover and cash rushes in on a .25% Fed funds hike and a statement that they’re at neutral and will be completely data dependent – essentially on hold pending further evidence – going forward. Beyond today we should be looking at more optimism around trade and a sunnier market mood heading into the new year: Which, once underway, will be fraught with other political uncertainties.

If, on the other hand, the Fed stubbornly sticks to its rosy outlook and its promises of several hikes next year, the market will tank this afternoon. I suspect they are fully aware of that and would prefer not to go there… But I’ve seen stranger things happen…

Trump’s heading to Davos (annual economic forum) in January. I see this as a huge opportunity for him to catalyze a positive turn in the global tide. Headlines suggest he'll do the opposite; that he’s going in to stir things up with his nationalist, anti-globalism message. The opportunity I see is for him to do a complete 180 by suggesting that we’re close to a deal with China and that he’s looking forward to working with our allies and fostering improved trade relations, etc., going forward -- essentially reassuming the U.S.’s leadership role on the global stage. If he goes there it’ll be hugely positive in terms of global sentiment and he can reestablish his 2017 popularity with the markets (it’s literally vanished as we close 2018); which will play well politically for him -- at a time when he sorely needs it. Going in, however, in a manner recent headlines are suggesting will be akin to shooting himself in the political foot, if not the heart.

On the geopolitical plus side, Italy has finally calmed down as its new populist leaders have struck a workable budget deal with the EU…

Brexit remains a headwind. A hard Brexit would be devastating for the UK, and, therefore, those who say they want it are putting themselves at huge political risk. If they understand that, we’ll get a workable Brexit (in the spring) as well…

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