December 20, 2021
Good morning,
If the industry of news is paid to sell fear, they are earning their keep today. The top headlines are shared between the rapid spread of Omicron and Senator Joe Manchin, who in a surprise move on Sunday, walked away from the Build Back Better Bill (BBBB). Not a single news outlet has missed Goldman’s GDP downgrade for next year either, though from what I can see they are all calling it a reduction from 3% growth to 2% growth for 2022. The actual call is +3% to +2% for Q1, +3.5% to +3% for Q2, and +3% to +2.75% for Q3 – quite a difference than what is being widely reported.
However, all today’s headlines notwithstanding, I believe the market’s biggest problem is that it has entered the holiday illiquidity zone. It amplifies the impact of significant flows. The propensity to take fresh risk is likely to be quite low across a range of strategies and asset classes. This may be as big an explanatory variable as Omicron or BBBB. Eight trading sessions left to the year, could be a bumpy, not so joyous, ride to the finish line.
See you Wednesday if not sooner.
Be well,
Mike