Well, suffice to say things didn’t go well on Monday for U.S. equities.
Things got off on the wrong foot when Donald Trump reminded everyone that – and this is a quote – “the outside world [is] blowing up around us, Paris is burning and China [is] way down.”
That, Trump says, is evidence that the Fed shouldn’t hike this week. More lackluster data didn’t help.
Unfortunately, Jeff Gundlach piled on at lunchtime, delivering a series of inflammatory remarks while donning an ostensibly calm demeanor that wasn’t at all consistent with the messaging which, in short, is that stocks are in a bear market and that the Fed would be stupid to hike this week.
This should be obvious, but in case it’s not: The more fearmongering there is about how dangerous a December hike from the Fed would be, the more likely it is to turn into a self-fulfilling prophecy.
Speaking of self-fulfilling prophecies, here’s one:
That’s what happens when a series of Gundlach headlines meet a market that lacks depth/liquidity. It was all downhill after Jeff weighed in. Nothing was green.
Healthcare cracking isn’t great news. It’s one of the few bright spots YTD, so seeing the index test the 200-DMA is somewhat disconcerting (i.e., it just feeds into the “death by a thousand cuts” narrative).
— Walter White (@heisenbergrpt) December 17, 2018
The S&P is now sitting at its lowest levels since October 2017 and the index has de-rated by the seventh most in nearly 70 years. The SPX P/E ratio has fallen by 5 points since the end of last year and that looks like once of the largest drops ever.
The S&P is on track for one of its worst Decembers on record, and this is likely being perpetuated by the ongoing headline hockey around trade, domestic political turmoil and an active community that is loath to participate in the madness.
The Russell is in a bear market – not sure I can add much to that assessment other than to note the obvious which is that small caps were supposed to be the “safe” hiding place from the trade war. So much for that and also so much for one the key “America first” trades.
Crude closed below $50, which I suppose further makes Trump’s case for holding off on another hike, although paradoxically, it’s terrible for risk sentiment as it undermines whatever’s left of the reflation story.
All in all, this is just another session that feeds into the prevailing narrative which basically boils down to the idea that something (whether it’s the data, or the price action, or sentiment or Trump’s sanity) is deteriorating every, single day.
I’m not sure there’s much else you can say about Monday other than: “Thanks Jeff!”