If Markets Get Goose For Thanksgiving
If markets get goose for Thanksgiving - might they get turkey for Christmas instead? Given how extended things are, that's always possible (especially in the wake of what will likely have been the most-anticipated nominal Fed move in history), given how a 'favorable' response to a hike is so discounted. Aside that, this remains geopolitically or financially; a sort of pate foie gras market.
Without excessively focusing on global terror; the ongoing events of this past week certainly imply that, despite the equity markets managing to generally hold up at a high range (the area either side of S&P 2100 is a 'battle-zone' we have approached from either side multiple times this year), 'business or even fiscal and monetary' policies are likely to be influenced by success; conversely impeded further (meaning even slower recovery efforts that won't respond to a new round of stimulus) should the series of terror attacks not be throttled by a robust round of security measures that not only deter, disrupt, neutralize, or deflect; but somehow forestall 'radical Islamic extremist' own growth plans.
We all believe this enemy would use such WMD's if given the chance, and I suspect that any leader knows we'd have no choice but to 'level' them if that happened. There's a logic too, for being proactive and shutting this terror movement down as we probably should have several years ago before it mushroomed.
For too many years, Muslims and especially many Europeans, have been too soft on Islamism, 'as if' it were the old political pro-Palestinian bias many had. They failed to see that the real challenge (another variation of what was done in the Middle East for years by blaming Israel in efforts to deflect inadequacies in their own Islamic countries) was not involving Palestinians or political; but an accumulation of Islamist's whose goal is more akin to 'reverse colonization'in Europe, and of course creation of a caliphate that sticks it's fingers into the Eurozone, much as it did historically in the Balkans or the Iberian Peninsula.
Now let's talk about the markets; but let's keep in mind that Brussels, contrasts with Paris, as the cancer there has already metastasized to the point where it was so dangerous, they had to shut it down. Perhaps we'll eventually know the details. In the meantime, have one or two more 'actual' shutdowns or alerts as we move into the Holiday season for Judaic-Christian countries (as they are; a reference to Hungary's Prime Minister being quite correct with his observations so many viewed as 'politically incorrect' a couple months ago), and business in addition to travel, with slow notably beyond the sluggish levels already seen.
While it is pretty clear general business activity remains sluggish, with CapExvery constricted partially as a result of very slow growth expectations; there's a renewed focus by the 'Street' on 'what works' stocks, presuming technology as well as financials can lift the market (neither of which is doing that great; and it certainly isn't with respect to retail holiday expectations). Nike and Apple alone won't loft the market on any sustainable basis. Nike's case was again buyback moves, although in this instance they actually have solid sales and dividends, at an historically high price however. Like Apple at its short-term peak; buying in the wake of sequential sales improvements and rallies, is playing with fire.
Sure it's occasionally frustrating pointing-out the valuation distortions and risk, or even the impact of buybacks (taking advantage of low rate environments as well as ensuring executive compensation, whether earnings are good or not); but it is the reality of this market. Any number of major hedge and mutual guys essentially acknowledge what's gone on for months (through declines or rallies alike), by virtue of the notable declines in so many funds, or even dissolving by a few funds, or serious cutbacks of holdings in others. And these are major too if you notice what's happen with Blackwater, Bridgewater, and even Vanguard, especially as relates to Emerging Market investments (we called submerging for years, and eventually they will be a value play; but we're not there yet).
In sum: little enthusiasm is how one can easily feel about markets. Not thrilled to buy stocks at high levels, but aware their institutional money managers just throw money into indexes or ETF's with seasonal funds almost blindly. Many of course, that have the flexibility, are trying to hedge or redirect holdings; with a mixed result, part of why so many funds are down for the year. Others levered up, and are heavily long of course, but increasingly jittery knowing leverage of course is what it's taken to bring the market back from the edge each time, but knowing how much damage it will do if they lose control at any near-term point ahead. They strive to push this through year-end, but with no assurance.
Hence while some investors bemoan the lack of bargains out there; notice lots of stocks have succumbed (such as in cyber and security areas), with forward prospects probably no worse than shares still holding-up. These contributed to a 'sell your losers and hold your winners' mantra; which itself is now overdone. That may make some of these, when combined with tax-loss selling, attractive to investors within the next few weeks. But as the 'momentum' survivors are at best the majority of issues holding-up the market; that doesn't reduce risk for a shakeout of the Averages; again in context with the extended levels prevailing.
There is continuity of duress in the jobs picture, and spin by Government that things are good, actually does a disservice to advancing citizen prospects. To artificially increase inflation in any way other than 'actual growth' is essentially counterproductive, especially for older Americans and Europeans; and brings that approach (such as Draghi advocated, and you know the Fed wants too) into question. Also having markets hold-up based 'solely' on monetary policy and the 'control' by central bankers is the kind of prop that is less stable than is thought by some, as the Fed (and certainly the ECB) are not omnipotent.
Overall conclusion: the history of markets is stocks don't stay aloft forever in-absence of real growth.
Daily action - popped the S&P at Friday's start, partially due to Nike or Apple; but mostly because it was the 'nominal' November Expiration at the opening. It is a reason we were flat overnight Thursday, but did fade the first hour's thrust.
Earlier Friday, the Fed posted a notification of a special interim meeting this Monday, November 23rd. Perhaps that influenced the market's retreat that we anticipated anyway; prior to late intraday squaring trimming the give-back a bit.
The new week is broken up by the Thanksgiving holiday of course, and while a lot of tension prevails both with respect to the FOMC; an extended but not very jammed overbought market; and of course the incredible geopolitical stress; it remains a hit-and-run approach for most traders at this point.
As far as the global issues; late Friday you had a 'unanimous' Security Council vote at the United Nations to urge 'ALL' member-states to do everything at all possible to combat ISIS (indirectly implying the name of this extreme beast) by using 'all tools and methods at their disposal'. For the UN such unanimity may have no precedence, and gets as close to I can think of for a 'declaration of a war' (and the endorsement for those who actually do); against ISIS, and by an association given Yemen and particularly today's attack in Mali, al Qaeda too.
For now we do hold a 'partial' short-sale guideline from Dec. S&P / E-mini fromFriday midday around 2091-92, with suggestions of taking gains in the final 30 minutes (before the late rebound) and retaining a bit ahead of Monday's start.
Note: as we go to press late Saturday; we hear that Russia has requested all commercial aircraft to 'avoid the Eastern Mediterranean area over the next couple days'. The implications 'might' be some sort of 'rebel roast' (not just of ISIS?) using strategic bombers brought into use this past week. However they normally fly over the Caspian Sea (eastern approach) so one wonders if this might be more around Aleppo. Impossible to say; perhaps coordinated with the French (which has more potential force near at the moment than does the US, because of the Charles de Gaulle aircraft carrier to augment the squadrons as are based in Kuwait and Qatar.
Too many say the United States doesn't have the stomach to stand-up to this: they're wrong and we must prevail. Yes, it may push us into doing what we've been 'told' radicalizes more; but doing it incrementally didn't stop recruiting; so given that Russia and France have basically declared war; it's clear (Brussels implies) that ISIS is activating terror cells more widely, hence it tactically won't prove anything to persist with a 'politically correct' approach against 'extremist Islamism' itself, as well as Islamic terrorism.
Disclosure: None.
So, you want a war on Islam, when in reality our policy has been regime change, not a war on terror? Don't forget, Gene, we armed ISIS, and we foster terror, not a war on terror.