Seeking Alpha by Adding Beta

After writing my last blog on  All Clear for Santa Claus Rally? , I never thought that my next blog would be on "Grinch who stole Santa Claus rally". But that's exactly where markets are at. It's just over 2 weeks and December which is normally a good month for markets is turning out to be worst December since great depression - yes that happened almost 85 years back! So how did we landed here? Well - lots of reasons and any or all of them are playing "Grinch" stealing what was supposedly Santa Claus rally after treacherous Oct and Nov. Let's look at these. Fed got itself into a bind by pre-signalling rate hike in Dec. With markets at delicate stage and inflation under control, ideally they should and would have liked to skip interest rate hike in this week's meeting. However President Trump's public statements against Fed would make Fed's job difficult in skipping interest rate hike. So if they increase, it's problem for markets (and...

Three most important men in terms of impact on market (President Trump, President Xi and Fed Chairman Powell) played nice to each other and markets. Starting with Powell's speech that interest rates being closer to neutral rate means pause after expected 25 basis point increase in December. Over weekend during G20 meeting, both Trump and Xi agreed to pause raising tariffs on Jan 1 and keep talking to reach "biggest" trade deal between US and China in next 90 days. With markets reaching low 2600 couple of times in Oct and Nov and rates and tariffs worries subsided should bode well for Santa Claus rally going into new year. Would markets reach all-time highs? It depends. If signs of substantial progress is made on trade talks between US and China, interest rates are not increased and economy still shows 2.5 to 3% growth without inflation, we could see markets reaching all time highs in Q1 of 2019. Of course FAANGs and Semis need to rejoin the party. That can happen if Q4 r...