December 22, 2021
Good morning,
Wow, elevated volatility into the holiday illiquidity zone mentioned Monday was an understatement. Monday’s torpedoed Build Back Better Bill (4B’s) and Omicron-is-Awful sentiment slammed markets down 1% across the board. Tuesday’s 4B’s is not dead yet, and Omicron-is-Mild sentiment sent market prices skyward, retracing Monday’s losses and then some.
This morning? Nothing. You wouldn’t know the VIX is still above 20 (sign of elevated uncertainty a.k.a. volatility) because every market – stocks, bonds, currencies is virtually unchanged overnight – very quiet. Frankly, it looks a bit more like what holiday markets are supposed to look like.
Near term focus will stay with the 4B’s and Omicron, and yet this too shall pass for the markets. I cannot shake the concern that next year begins a tightening cycle, the Fed turns into a headwind, and many bear markets occur around tightening cycles. Note however that not all tightening cycles have bear markets inside them.
Oh well, time to put the fear aside (technical signals are diminished but still lean favorably) and get into the HO-HO-HO. Merry Christmas everyone. Have a great weekend and I’ll check in with you next Tuesday.
Be well,
Mike