Sexy Equities Get All The Attention...

But Boring Bonds Turn In Their Best Month In Over Four Years!

Highlights

• Proliferation of “Buy Now, Pay Later” takes the shine off Black Friday/Cyber Monday spending

• Can Bill Ackman go 2-for-2? Hedge fund manager bets on rate cuts in Q1

• The current pace of disinflation is in line with the previous four episodes seen since WWII

• Mortgage holders in Canada cut spending as interest costs bite

While We Were Sleeping

Yesterday’s action in the equity market was nothing more than a nothing-burger. What stood out was the -0.5% pullback in the Russell 2000, the -0.6% drubbing in the Transports, and the -0.3% dip in the Financials. The challenge of a market with a split personality has not gone away with this most recent momentum- and seasonal-based rally. The Russell 3000 Value Index has returned just +2.0% this year, while the Russell 3000 Growth Index has surged by +32.8% (and is trading at a 32x P/E multiple!) in the second largest gap on record dating back to 2000. High yield spreads widened out a touch.

But the real star performer was the Treasury market, defying expectations yet again despite booming supply. The 4.32% closing level on the 10-year Treasury note was the lowest since September 18th, and we have now retraced all of the sharp yield backup that occurred after the Fed meeting that month that advertised “higher for longer” and stamped that call with a premature addition of one more hike to the “dot plots.” The “higher for longer” narrative was even more transitory than “transitory” was! And what about gold? All it took was a mild -0.4% decline in the dollar to elicit a huge +1.3% pop in the yellow metal to $2,041 per ounce — and fast approaching the 2020 August 6th peak of $2,067 per ounce. In the past month, the bond-bullion barbell has very nicely delivered a +4% total return.

In the overnight trade, the equity markets are back on a solid footing. U.S. futures are up and gaining momentum. European markets have firmed +0.5% in the aggregate. Asia, however, was more nuanced yet again with much of the region feeling the ill-effects of a big setback in Chinese tech stocks: gains in India (+1.1%) Singapore (+0.6%), and Taiwan (+0.1%) but the good news ended there as we saw losses in Hong Kong (-2.1%), Thailand (-0.9%), China’s Shanghai Composite (-0.6%) and Korea (-0.1%). The DXY dollar index has steadied at a four-month low of 102.8 but the chart still looks ugly, and the index remains -4% off its early October highs (of note, the Japanese yen has crossed above its 100-day moving average for the first time since last April).

Bond markets continue to rock and roll — down an extra -2 basis points for the 10-year T-note to 4.30%; down closer to -4 basis points across the Atlantic; and we had monster rallies in both Japan (-9 basis points to 0.66%) and Australia (-13.5 basis points to 4.36%).