The EOY Dilemma

Wed Dec 29

So we have all been blowing our kazoo’s for the last decade as the Fed made good on the Powell Put (formerly known as the Yellen and Bernanke puts). End of year (EOY) seasonality once again put money in investor’s pockets. Now the winter is upon us. So what’s next?

Wall Street is calling for strong earnings. The usual banter for a new super bull is out there. That is possible if all the central banks slap each others’ backs and and exhale a bunch of hot QE all at once. While that is a possibility, it is not what I’m banking on. Inflation is now rearing its ugly head and it is not transitory.

We are coming to the end of a credit cycle (the last one was in the Lehman days). These are ugly events. This one promises to be worse due to the unbridled money creation over this past decade. So no, I don’t see another few years of euphoria. At best, the markets start off strong but ominously just keep losing steam as broad breadth gets weaker and weaker. Volume will start drying up until one day when it explodes. Stocks will rotate out to the wood shed until no one has been spared.

On that jolly note, here’s an A list both technically and fundamentally. These sectors have been gaining strength recently as well.

Good trading!

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