With Vaccines And Stimulus On The Horizon, Markets Ready For Takeoff

There is a great sense of optimism this morning, as investors look for fiscal stimulus to happen, watch the vaccine roll out and brace for the Federal Reserve to provide more accommodation. This, after last week saw some pressure; although, nothing approaching panic.  On Friday, there were decidedly more decliners than advancers but on light volume.

Watch the VIX this week, which edged higher and continues to remain above the long-term average, even as major equity indices are making new highs.

Hello Tina

There was talk of Tina (there is no alternative) throughout the spring and summer as a reason for the stock market’s strength but flows into mutual funds and exchange traded funds skewed heavily toward bonds – it wasn’t even a contest.

There were signs of stocks becoming more attractive to ETF buyers in September, but bond inflows were three times higher in October.  Then came November, which was a record month for inflows into US equity ETFs.

That trend continues in December as last week’s trends reveal.

• US equities $4.1 billion
• US bonds -$448.9 million

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Meanwhile, the ten-year yield is rising again.

Portfolio Approach

We are adding to Consumer Discretionary this morning in the Hotline Model Portfolio.

Today’s Session

If we do get $908.0 billion in fiscal stimulus, look for the market to take off as fear of missing out becomes fear of losing my job among many money managers that have been behind all year long.

Look for more macro nudges from whispers and platitudes on Capitol Hill.  Meanwhile, the market is poised for a big pop higher if a deal really happens.