Markets Don’t Care About December Weakness

The first vaccines are going out now. We should know how well the entire rollout will go by mid-January. I’m not saying it will be over by then. That’s when we will have solid visibility.

Commodities Scream Recovery

The economy is recovering according to the Markit PMIs. Vaccines are going out and a stimulus looks more likely. According to Treasury Secretary Mnuchin, he presented Speaker Pelosi with a $916 stimulus bill which is $8 billion more than Pelosi and Schumer agreed with. 

The best part of this news is McConnell is on board with it. The bad news is Pelosi disagrees with the details, so more work is needed. There is a 75% chance something passes in December. As a reminder, the Georgia Senate votes are January 5th. There aren’t any new polls. We don’t know if polls will help us because there won’t be data around the holidays. Both races are a toss-up.

Commodities are all aboard the reopening train. As you can see from the chart above, despite a rough start to the year because of the recession, copper is up 25% year to date and iron ore is up 50%. Freeport-McMoRan stock is up 85.4% year to date because of the recovery in metals. Once the economic recovery is in full swing, take profits in FCX stock.

Conclusion

Mobility waned in the 2nd half of November. Imagine how bad it got in the first half of December given the record high in hospitalizations and the government restrictions in California. Investors are looking past the December and January slowdown as commodity prices are exploding. 

Small business confidence fell a little, but CEO confidence was strong. Of course, the NFIB numbers make small businesses look better than they are doing. Small businesses will only get a modest amount of help from this stimulus, but we could get a bigger one next year if the Dems win both Georgian elections. A guess is it will be a split.

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