Geopolitical Whiplash from Caracas to Tokyo
The “Donroe Doctrine” is a strange fit for a global oil supply glut
Key Takeaways
Venezuela Won’t Be a Quick Boost to Energy Firms: Did investors (who loaded up on U.S. energy stocks on Monday) realize that the expected return for the huge investments that need to be made is highly questionable? What exactly is the risk-reward trade-off from fixing rusting wells in an unstable country and into a global supply glut? The upfront cost is absolutely huge, no matter what that number turns out to be, especially considering the expense of refining this dirty crude — and then likely selling it at hefty discounts to already depressed benchmark oil prices.
Labor Market Data in Focus: The job openings collapse in the November JOLTS data was remarkable, with -303k job openings disappearing and another -221k being revised away from the October data. Predictably, if there are fewer job openings, there will be less hiring. The ADP payroll report came in lighter than expected, as did the ISM manufacturing PMI. The only data pointing in the other direction was ISM services, but we net all of this out to a weak labor market. Today will bring the initial claims and Challenger layoffs data, but tomorrow’s nonfarm payroll report is the key.
Uniform Bullishness Represents a Rigid Consensus: We are currently witnessing a spectacle of synchronized bullishness that rivals the darlings of the Nifty Fifty era and the Tech mania of 1999. The narrative has shifted from “Goldilocks” to something approaching a fairy tale where bears don’t exist, recessions are outlawed, and valuations have detached themselves from the gravitational pull of mathematics. Every major Wall Street strategist now holds a bullish year-end target for the S&P 500. There is not a single bear on the street. The dispersion of targets is the narrowest I have seen in my career — everyone is hugging the same trend line.
