Remember October? The economy was sputtering, hope had become a dangerous thing (Shawshank Redemption, 1994) and the S&P 500 was on its longest monthly losing streak since March 2020, down 9.4% from the highs, standing at 4100. Then something very strange happened in the neighbourhood (Ghostbusters, 1984), and talk of seven rate cuts in 2024 made the rounds.
In an instant meat was back on the menu (Lord of the Rings, 2013), oil prices fell to 68, the Dollar index plummeted to 100, and the biggest equities rally we have seen in decades ensued. Merry Christmas. The problem was that the grinch kept telling us that money was too tight to mention (Simply Red, 1985) and the Fed pivot was far from a sure thing.
It did not matter, and even though the markets are now pricing in a mere three rate cuts this year, the S&P500 has climbed all the way to 5200. Not only that, but oil is back at 86, because you know, we are on the brink of World War 3. Yields are up around 50 basis points across the curve and the Fed is still sittin on the dock of the bay (Otis Redding, 1967).
So, what gives? One thing is for sure, the force is strong with this one (Star Wars, 1977) and the momentum of this rally has been relentless. Any bad news is cheered, because it fits the narrative, and good news is celebrated, because, well it’s good news. Long and strong, unless of course, Arsenal wins the Premier League, then you better Run like Hell (Pink Floyd, 1979).