I think the big news is the market is returning to a rational state, where bad news is bad news and good news is good news, because the Federal Reserve has removed itself as the wild card. On that note, I think the December jobs report was under-reported and under-celebrated but was glad to see the stock market surge on the news.
Part of the sobering process is a series of epiphanies:
- A company that will have $84 billion in sales and $130 billion in the bank isn’t going out of business
- Manufacturing expanding at a slower rate isn’t the same as contraction
- Robust job growth, while a backward metric, lends to current economic momentum
- Stocks are changing hands at valuation metrics not historically associated with market crashes
Fed Holds Back
Much is being made of the Federal Reserve’s latest effort to engineer a so-called “soft landing” for the economy. It has never really been done, but I applaud the fact this Fed understands the mess previous actions have created and simply running off trillions of dollars in “accommodation” could recreate the crisis it was designed to solve in the first place.
I’m not sure they can make a soft landing happen, but the more they pause and allow the economy to work, the better off we’ll all be.
Jobs Report
I’m still buzzing over that jobs report and the implications for more Americans previously shut out from any hopes of economic prosperity. The only sore spot are folks working multiple jobs.
- Women 4,078,000
- Men 3,952,000
- Total 8,030,000
Portfolio Approach
The Santa Claus rally has seen the market rally 4.0% in the last week of 2018 and the first two days of 2019. That’s a big move, let’s see about backing and filling, and remaining cash should be held tightly.
Recommended
Communication Services | Consumer Discretionary | Consumer Staples |
2 | 3 | 1 |
Energy | Financials | Healthcare |
1 | 1 | 1 |
Industrial | Materials | Real Estate |
3 | 4 | 0 |
Technology | Utilities | Cash |
1 | 0 | 3 |
Today’s Session
Today kicks off a two-day meeting between the United States and China to resolve the trade dispute. There are key negotiating members from both nations, including U.S. reps from Treasury, USTR, Commerce and Agriculture.
Early this morning, reports of surprise visit by China’s Voice Premier gave equities a pre-opening boost. It seems increasingly clear, China is ready to make concessions unlike any they’ve ever made before.
Merger Monday
Another big takeover in biotech is setting the pace on Merger Monday. Eli Lilly (LLY) is buying Loxo Oncology (LOXO) for $8.0 billion in cash.
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