WASHINGTON –In Monday trading action, US stocks continued to benefit from a Brexit Boost. Continued good feelings on a now likely China accord are helping stocks along as well.
Has the Santa Claus Rally returned?
Indeed, after faltering a bit in early December, the fall rally in US stocks finally picked up the pace last week. In the process, the Dow topped its record high – twice – and did it again Monday morning. Fingers crossed. But it looks like we might finally witness the kind of Santa Claus Rally all investors were hoping for.
Not only will a genuine Santa Claus Rally boost actively invested portfolios. It might erase the extra bad memories stemming from that depressing Q4 2018 market crash. Most of us still remember that one, as 2018’s handsome gains completely evaporated in one, agonizing 60+ day tumble.
Sure, something like that could still happen again in the second half of December 2019. But every day that it doesn’t is another day we might be able to book our generally handsome 2019 gains on December 31, the last trading day of 2019. Meanwhile, the Brexit boost and likely China accord are working their market magic.
Is “Repo Man” haunting future stock market action?
As usual, however, potential problems loom on the horizon. The continuing problems in the US repo market may prove the most vexing.
- They’re ongoing, with no particular end in sight; and
- Given that this is a Fed / interbank issue of great complexity, most of us, including this writer, don’t fully understand what the heck is going on here and why the Fed seems helpless to stabilize the situation.
More on the hidden repo issue. Something? Or nothing?
Innovative Income Investor’s Tim McPartland had a couple of observations on this issue last Friday.
“As some of you may have read, or maybe I am the only one watching, the FED has announced giant sized REPO moves for the balance of the year.
“I have been watching since September and the FED has done overnight repurchase agreements in the $50 to $75 billion area mostly–tossing in $15-$25 billion in 14 day repurchases agreements every 2 weeks.
“Of course this is to provide liquidity to the banking system after a ‘blow out’ overnight lending rate spike of near 10% on September 15th.
“Now we are 90 days later and the FED has announced they will be taking the overnight operation to at least $150 billion. Yikes!!”
I’m not totally up on why this system continues to face constant disruptions, going back to at least this past September. It seems to be a new liquidity phenomenon, and I’d thought the Fed had dealt with this years ago.
Could the Fed face a problem it cannot really solve? If so, why?
So far, nothing seems to have influenced either Mr Market or everyday investors. Yet. But I, like Tim, worry that there’s something going on that could suddenly disrupt our current bull market good times with something seriously disruptive. Tim concludes his remarks with the following observation.
“I am of the thought now that this is all out on the table we will likely avert major issue—BUT there is a chance of a misstep–in particular in light of the fact that no one really seems to fully understand the market workings (certainly I don’t under stand it).
“The point being is that we could see disruptions in the next 3 weeks–through the end of the year and no one should be surprised it something ‘breaks.’”
Tim provides a link to the FED Statement of operations here for those who want to get down in the weeds on this one.
More Monday stock market recap stats
While US stocks opened with a 250+ point rise in the Dow earlier today, there seems to be a slow leak developing in the market’s celebratory balloon as the day ambles along. As of 3 p.m. this afternoon, the Dow has lost exactly half its gain, and the party seems as if it’s fizzling out near the closing bell.
Earlier, according to CNBC, tech stocks in particular drove the morning charge.
“Tech shares hit a record as the sector surged more than 1%, led by a 4.7% jump in Micron Technology and a 5.2% gain in Western Digital. Goldman Sachs propelled the Dow to an all-time high, rising 1.9%.”
Likely China accord continues to boost stocks
As we noted earlier in this article, the still unsigned China accord likely provided most of this morning’s boost.
“Sentiment was also lifted by strong economic data out of China. Chinese industrial production rose 6.2% in November on a year-over-year basis, topping expectations. Retail sales in China also jumped 8% last month.
“The U.S. and China announced Friday they will move forward with a so-called phase one trade deal. As part of the agreement, the U.S. will roll back some levies on Chinese products and China will increase its purchases of U.S. agricultural products. Treasury Secretary Steven Mnuchin said will be inked in January.”
More on the Brexit boost and reaction from the usual suspects
But again, let’s not forget the secondary but perhaps equally important boost the smashingly decisive pro-Boris Johnson, pro-Tory, pro-Brexit landslide victory that unfolded last Thursday evening in a way eerily similar to the dawning of the shocking (to the media) Trump victory in November 2016’s US presidential tally.
“Leavers” – aka, fans who endorsed the Brexit boost Thursday – continue to support this decisive victory for the Eurozone exit the voters had already confirmed once. While the so-called “Remainers” – basically students and elements of the UK’s Deep State and #NeverBrexit die-hards took to the streets with banners, posters, tired by hyperactive chants and pure outrage, vowing to “resist” and overturn the will of the people and oust BoJo. Just the way America’s Deep State counterparts and their student lackey vowed to “resist” Trump and still are, via the House Impeachment Circus.
Brilliant independant news report from UK show exact Deep State / globalist correspondence between #NeverTrump #Resistance and die-hard UK “Remainers”
For a brilliant UK news program on the strikingly similar issues roiling both countries, check out the half-hour video below, which provides insights you won’t get from the MSM or the BBC for that matter.
We’ll have more on this in another column. But suffice it to say that it’s going to be a long winter in London and in other multi-culti outposts throughout the UK.
But with regard to US markets, they seem to be looking the other way on the UK’s relentless, #NeverBoris, #NeverBrexit globalist and Marxist crapology. And looking forward to a new China accord for the US. At least for now. Which is good for us.
– Headline image:
Image via Wikipedia entry on Brexit. At the front of a 2017 demonstation against Brexit in Manchester a float showed a multi-headed chimera with the faces of Theresa May and three leading Brexit campaigners: Foreign Secretary [now PM] Boris Johnson, Environment Secretary Michael Gove and Brexit Secretary David Davis. It beared the inscription “Brexit is a monstrosity” – “Let’s stop it”. The float was made by Jacques Tilly and his team. But they ultimately lost. The “Remain” effort went down to defeat for the second and final time on December 12, 2019. The photo was taken by Robert Mandel. CC 4.0 international license.