Will Santa Leave A Lump Of Coal?

As we enter the last month of the year, the holiday season is kicking into full gear, decorations are popping up everywhere, and the burning question arises, “Will Santa Claus bring gifts for stock market investors, or will he leave a lump of coal in their stockings?”

It was a bumpy sleigh ride last month, but we ultimately entered December in a festive mood with joyful monthly gains of +1.7% in the Dow Jones Industrial Average, and +1.8% in the S&P 500. There have been some naughty and nice factors leading to some turbulent but modest gains in 2018. For the first 11 months of the year, the Dow has rejoiced with a +3.3% advance, and the S&P 500 has celebrated a rise of +3.2% – and these results exclude additional dividends of approximately 2%.

Despite the monthly gains, not everything has been sugar plums. President Trump has been repeatedly sparring with the Federal Reserve Chairman, Jerome Powell, treating him more like the Grinch due to his stingy interest rate increases than Santa. As stockholders have contemplated the future path of interest rates, the major stock indexes temporarily slipped into negative territory for the year, until Mr. Powell gave stock and bond investors an early Christmas present last week by signaling interest rates are “just below” the nebulous neutral target. The dovish comment implied we are closer to the end of the economy-slowing rate-hike cycle than we are to the beginning.

Trade has also contributed to the recent spike in stock market volatility, despite the fresh establishment of the trade agreement reached between the U.S., Mexico, and Canada (USMCA – U.S.-Mexico-Canada Agreement), a.k.a., NAFTA 2.0. Despite the positive progress with our Mexican and Canadian neighbors, uncertainty surrounding our country’s trade relations with China has been challenging due to multiple factors including, Chinese theft of American intellectual property, cyber-attacks, forced technology transfer, agricultural trade, and other crucial issues. Fortunately, optimism for a substantive agreement between the world’s two super-powers advanced this weekend at the summit of the Group of 20 nations in Argentina, when a truce was reached to delay an additional $200 billion in tariffs for 90 days, while the two countries further negotiate in an attempt to finalize a comprehensive trade pact.

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Disclosure: Sidoxia Capital Management (SCM) and some of its clients hold positions in certain exchange traded funds (ETFs), but at the time of publishing had no direct position in TSLA or any ...

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