December 8, 2021
Good morning,
For most of last night’s trading, Futures were up ~10pts (+.20%). At 7am ET, this headline printed “Three Doses Pfizer Vaccine Neutralizes Omicron Variant”. The next Futures price was +30pts (.64%) higher. The initial move on any headline is machine driven (the algo machines), what the market does after the initial machine move is investor driven. An hour after the headline (8am ET), Futures were back to where they spent most of the night, +10pts (+21%).
This morning’s headline is one of the first to come out of a lab, and more hard scientific data will likely follow. The market, on the other hand, just completed its biggest 2-day climb in over a year. The uncertainty that the Omicron variant dropped on top of the market beginning the day after Thanksgiving has been wrung out at this point and true to form, before the scientific data came to light.
Hat tip to Tim Hayes for his very confident call over the weekend -Monday’s Morning Note. Shame on me for throwing a little rain on that parade.
Despite this week’s strong rally, I remain concerned about the Fed’s recent pivot. When the Fed and central banks around the world pumped record stimulus into the economy to combat the pandemic, they knowingly risked inflation to prevent a depression. Two years later, policymakers have the job of reversing the flow. How well they navigate the stimulus removal will likely be the biggest driver of financial markets in the weeks and months ahead.
Be well,
Mike