Hey folks as this decade winds down and we move into another “roaring 20s” we have many different forces acting on current markets and price action. Welcome to our Weekly Round-up!
Market Sound-Bites:
• Jobs, Jobs, Jobs….it’s all about the Jobs as we ended this past week with an outstanding Monthly Jobs report that showed nonfarm payrolls jumped to 266,000 (100,000 more than economists expected) as well as revising prior months higher by 41,000…Meanwhile the unemployment rate dipped down to 3.5% and labor force participation remained at 10 year highs against a backdrop of low inflation and a supportive Federal Reserve…this is a Goldilocks type market that price action loves…all great numbers as this Decade comes to a close in about 3 weeks and we kick off the 20’s…
• Of course markets registered its approval of these Jobs Numbers with a strong finish to the week that had started off in very poor form…At the beginning of this week we saw hostilities using Tariffs against Brazil and Argentina followed by Trump’s statement that he could wait until after the 2020 Elections to get a deal with China which then implied the Dec 15th Tariffs on $160 Billion in Chinese Goods would hit next weekend…which by the way, they still might as some argue that Trump should use the strong employment data here in the US as a way to take more take and seek more concessions from China letting the Dec 15th Tariffs hit….
• Either way, most economists expect good things for 2020 but not at the rates we had in 2019 from price action…while the FEDs are not expected to hike rates next year, the extra liquidity pumped in by the Feds have helped push price action to higher levels…Morgan Stanley sees the next Decade as returns coming back more to normalized levels pointing towards lower gains across most US Indexes…and with the FEDs meeting next Tues/Wed with a Policy Statement on Wed market participants will be listening very intently on Jerome, “Power Ranger, Boom-Boom” Powell’s statement and subsequent press conference…markets expect no changes and an accommodative Fed with a 65% probability of another 25 bps rate cut next year…
• And while US Small Cap has underperformed large cap and lagged the broader markets for a few years we are beginning to see some evidence this could change going into the new year…Current valuations in the small cap stand about two standard deviations cheaper relative the S&P 500 so the upside looks more promising, especially since this is the most seasonally bullish time of the year for small cap stocks…and it is also worth noting the last all-time highs for the Russell was over 52 weeks ago, and looking at the stats shows the Russell was higher in the following 12 months in 10 out of 11 similar instances since 1982 with average gains of 15.2%….according to Bank of American small caps should outperform in 2020…also, keep in the Russell is heavily weighted financials and Bio Tech vs the S&P 500 making it a bit more sensitive to market downturns…
• One final note will be the U.K general elections this Dec 12th (Thursday) where we will find out if Boris “Bulldog” Johnson will be able to solidify his control of the British Parliament and bring an in to the BREXIT dilemma by end of January…This will affect the USD, the British Pound and the Euro…
Enjoy this Weeks Market Round-Up
Don’t Be A Rat Brain – Be the Red Stripe Zebra !!
Trade Smart !
hpb
