Can This Year Just Please Be Over?
There is a strong consensus among clients that 2019 has been too good to be true, and a wish that it could be over right now so that gains could be booked before they slip away. But US equity gains from the September 2018 top have actually been substandard, and stock/bond relative valuations are in equilibrium. Three risk events must be endured before year-end. At tomorrow’s OPEC meeting, the cartel has the opportunity to insulate oil prices from a shale-driven global glut, by tightening quotas. Failure to do so could usher in a deflationary collapse. The Fed won’t change rates next week, but markets will be looking for guidance that could point to a steepening of the yield curve. New tariffs on imports from China kick in on December 15 unless a “phase 1” deal is done or strongly indicated. China has a political incentive to delay negotiations, and Trump is scaring them back to the table with bellicose rhetoric.