Another year is in the books. Lots of surprises, most notable probably being the significant rise in the stock markets. The S&P 500 logged a banner year. Who’d a thunk?
Of course, the markets aren’t one to rest. So it’s already time to start looking forward again. This Thursday will be a forum call where we’ll take a more in-depth look at the year ahead. But for this week, don’t over-think it.
Many have called for the markets to correct. When pushed for why, the answer is simply ‘inflation’ or ‘we’re do.’ Caution. As the saying goes, bull markets don’t die of old age. Something kills them.
Looking forward, it’s unclear what the specific thing is that kills this bear market. The most obvious bull killer would be the Fed though. It has been the Fed that has largely fueled the market since 2008 with all measure of different forms of monetary easing. Looking forward, the talk is about monetary tightening.
It may be tempting to blame Covid or Congress or any other measures. Those certainly flavor the cocktail. But in the end, the Fed has pulled the big levers. Assuming they tighten, you’d expect a reaction.
But here’s the thing. The markets are looking for this. They expect it. The Fed is forecasting it. And historical data suggests markets often rise into higher rates.
This would make sense based on the concept that the economy is strengthening and therefore rates must rise. The question is, when does the rubber band break?
This is something we’ll discuss more on Thursday’s call. Between now and then, we have this week to examine.
Futures are indicating a positive open. Last year finished with some returning momentum in the tech space. It looks like that momentum is set to continue. Look for a positive start to the week, with an anticipated range between 4846/4705. Bias is positive, and it’s possible the market pushes above the 4850 level by week’s end.
Happy New Year!
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