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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