January 6, 2025
Good morning,
There is not much to write about this morning that wasn’t covered in last week’s Morning Notes. As a recap of the last two months, the post-election rally in stocks on the perception of a business-friendlier new administration ran out of gas toward the end of the year on higher yields in the bond market due to the risk of higher inflation around the threat of higher tariffs enacted by the same new administration. In short, new policy uncertainty of the new administration caught up with the bubbly bull market move at year-end.
The uncertainty may not fade until the inauguration later this month. It will be difficult for investors to gain the conviction needed for the next leg up of a bull market. However, that cuts two ways. With profit taking likely completed last month, selling conviction may be lacking as well.
The good news about this January, with the forces demand and supply somewhat balanced, is that historically, weak Decembers have been followed by recoveries during secular bull markets. And as discussed last week, we are still in a bull market despite December’s damage.
Be well,
Mike
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