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All Clear for Santa Claus Rally?

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 results continue to show momentum in top and bottom lines. At least cloud software companies like Salesforce, Splunk, Workday are keeping up the momentum. Semis (MU, AMD, Broadcom etc) and Energy (with stability in oil price) need to demonstrate that bottom is in. Healthcare seems to be holding up well. With biggest Biotech IPO (Moderna) around the corner should be good for biotech stocks also. 2019 would be a big year for tech IPOs with Uber, AirBNB, Lyft, Palantir and so on. Weekend was interesting with college football championship matchups. In SEC championship, Alabama showed why it is #1 team in college football by rallying from behind (14-28) to win by 35-28 that too with help of backup quarterback. Hats off to Jalen Hurts! Now looking forward to who takes the #4 slot for playoffs (Oklahoma or Ohio State).
President George H.W Bush died on Nov 30 at age 94. He was one of the best President who did not get his due recognition despite ending cold war and navigating thru economy at difficult times. He was true patriot and we will miss him.

/Shyam

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