We're at the moment consumed with year-end rotations, etc., but I wanted to just pop in with a super quick update.
Some of you have been paying close attention to the repo issue that has some pundits very much on edge. I haven't made it a huge issue herein as it's been my position that the Fed would succeed in printing the issue into 2020. Which, literally, over a half-trillion dollars of printing later, seems to have done the trick. Make no mistake, all of this emergency liquidity, amid the Fed couching it as nothing but a technical glitch (it's more than that for sure), has to no small degree fueled this impressive end of year rally in stocks. We'll see how the market responds when (as we should presume they must) they begin to back off.
On the trade front, China's top negotiator is coming to town next week to sign the phase-1 deal (or so the blurb I saw today suggested). It appears as though that's priced into the stock market. So now, whenever the market begins to buckle, look for quick comments from Washington that the phase-2 is going great. Like I said the other day, if you're short-term in this market, worry a bunch when such talk doesn't spark a quick rebound.
Bottom line folks, as I've illustrated ad nauseam of late, the bull market conditions are over, at least for now.
What we're currently experiencing is globally coordinated stimulus aimed squarely at the stock market; for the powers-that-be know that the next sizable correction could easily be the straw that breaks the longest expansion ever's back.
The question remains, will it (all the stimulus) keep the train running as it did when things got dicey in 2011, also during the 2015/2016 rough patch, and in Q4 of 2018?
Well, it indeed could, however, our assessment of conditions at each of those periods was -- unlike the present -- such that we stayed the course with our bullish allocation. In that conditions are currently worse in our view than during each of those periods, and that, in the meantime, a very dangerous setup in the corporate bond market has developed, we have determined that it is very much in our clients' best interest that we -- per our new core allocation -- right here play some defense.
In case you missed them, here are our two latest videos; the first outlining general conditions, the second detailing our new core strategy:
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