Yay For Yellen! (And Pretty Much Everything Else)

Markets love known quantities. Former Federal Reserve Chair and current Secretary of the Treasury Nominee Janet Yellen is certainly one of them. The S&P 500 (SPX) rose at a 12.6% compounded rate during her term at the Fed, giving confidence to investors that she will do little to disrupt the smooth functioning of markets and the economy. Stock markets reward performance. Yellen delivered that.

It was little surprise that stocks rose after her announcement yesterday and continued to rise today as we further digested her selection. The news that the General Services Administration was finally recognizing Joe Biden as President-elect certainly helped as well. Markets also rose on the news that Pennsylvania certified its electoral results. We appear to be putting the electoral chaos behind us, which should quell most of the residual worries that accompany that uncertainty.

The list of stocks, indices, and other investable items that are at or near all-time or long-term highs is enormous. As I write this, the Dow Jones Index (INDU) is flirting with the 30,000 level, while Bitcoin approaches $20,000.Both may well have crossed those thresholds by the time you read this. Why not? They both seem to go up every day. 

That last sentence that worries me. It is difficult, if not foolhardy, to get in the way of the multiple freight trains that are racing through the markets. Right now, the market seems to have the best of both worlds, pricing in a robust post-vaccine recovery and overlooking a potentially frightening present and near-future. We are effectively ignoring the expiration of rent and student loan moratoria at the end of next month, among other things. (How much of the rally has been fueled by small investors speculating with their deferred student loan payments?)To a degree that focus on the longer-term is ok – markets are supposed to price in events 6-12 months away. But how much of it has been priced in already? And what happens when the Fed decides that it’s ok for long-term rates to rise?

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Disclosure: The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the ...

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