What We're Reading

The bulls are back. $SPX up nearly 8% in January and nearly 14% off of the December lows. What slowing global growth? What reduced earnings expectations? Trade wars? Who cares. It’ll all sort itself out, all that matters was the Fed caving in spectacular fashion laying the foundation for the big bull case. The central bank 2 step is back: Dovish + dovish = nothing but higher prices. The lows are in, what else can I buy? This pretty much sums up current sentiment.

And so goes the familiar script during emerging bear markets, a general sense of relief that the lows are in and a return of optimism and greed after an aggressive counter rally following an initial scary drop. Long forgotten are the December lows after a torrent consecutive 6 weeks of higher prices.

While indeed a renewed fully dovish Fed may be all that’s needed to keep 2019 bullish (after all this playbook has worked for the past 10 years) there is evidence that this rally may turn out to be a big fat bull trap.

And it’s no

With the SPX up ~8% in just the last month, increasingly nervous investors who still vividly recall the freefall days of December 2018, are wondering what will stop the unrelenting rally according to JPMorgan's Adam Crisafulli who writes this morning that while there are always risks, none of the (known) ones seem particularly threatening at the moment.

Still, according to the JPM strategist, investors should be wary about chasing the SPX above 16x (i.e. above ~2750) but the index is more likely to touch 16.5x (>2800) than it is to hit 15x (<2600) based on everything known right now.

With that modestly bullish bias in mind, Crisafulli lists 14 things that can go wrong and send stocks sliding once more.

1. TSYs and the USD fail to ratify the Fed optimism – at some point the TSY curve needs to steepen and the USD has to weaken in order to confirm the dovish takeaways from the recent Fed decision.  If TSY yields fall across the board (or even worse, if the curve flattens) and/or the USD sta

With Inauguration Day here, politics and government policy will continue to be a focus area for the markets. Over the past few months, President Trump has outlined a number of areas for potential changes in government policy.

During each corporate earnings season, it is not unusual for companies to comment on subjects that had an impact on their earnings and revenues for a given quarter or may have an impact on earnings and revenues for future quarters. While the majority of S&P 500 companies will report earnings results for Q4 2016 over the next few weeks, approximately 8% of the companies in the index (42 companies) have already reported earnings results for the fourth quarter (through Wednesday). Have companies in the S&P 500 been commenting on government policies that may change under the Trump administration during their earnings conference calls for the fourth quarter?

To answer this question, FactSet searched for the terms “Trump” and “administration” in the conference call tran

President-elect Donald Trump suggested he would be open to lifting sanctions on Russia and wasn’t committed to a longstanding agreement with China over Taiwan—two signs that he would use any available leverage to realign the U.S.’s relationship with its two biggest global strategic rivals.

In an hourlong interview, Mr. Trump said that, “at least for a period of time,” he would keep intact sanctions against Russia imposed by the Obama administration in late December in response to Moscow’s alleged cyberattacks to influence November’s election. But he suggested he might do away with those penalties if Russia proved helpful in battling terrorists and reaching other goals important to the U.S.

“If you get along and if Russia is really helping us, why would anybody have sanctions if somebody’s doing some really great things?” he said.

He also said he wouldn’t commit to America’s agreement with China that Taiwan wasn’t to be recognized diplomatically, a policy known as “One China,” until he

In the Industrial Revolution of the late 18th and early 19th centuries, one new force changed everything. Today our world is undergoing an even more dramatic transition due to the confluence of four fundamental disruptive forces—any of which would rank among the greatest changes the global economy has ever seen. Compared with the Industrial Revolution, we estimate that this change is happening ten times faster and at 300 times the scale, or roughly 3,000 times the impact. Although we all know that these disruptions are happening, most of us fail to comprehend their full magnitude and the second- and third-order effects that will result. Much as waves can amplify one another, these trends are gaining strength, magnitude, and influence as they interact with, coincide with, and feed upon one another. Together, these four fundamental disruptive trends are producing monumental change.

1. Beyond Shanghai: The age of urbanization

The first trend is the shifting of the locus of economic activi