Give Thanks

A lackluster pre-Thanksgiving session stateside found the dollar falling to the lowest since April of 2018 and stocks generally mixed following a slate of data that suggested a robust, sustained recovery for the world’s largest economy is not a foregone conclusion.

While durable goods orders offered some sunshine, personal incomes fell much more than expected last month, while jobless claims rose a second week to the highest since mid-October.

Generally speaking, the October data is “stale” considering the explosive growth in COVID cases since then, and there’s no sign that Congress is serious about delivering a sizable fiscal package during the lame duck session. The November Fed minutes contained plenty of banter about the future of monthly asset purchases, but the urgency for tweaks to either the pace or composition of bond-buying may be ameliorated by the proximity of Janet Yellen’s Treasury takeover.

Read more: The Fed Talked Quite A Bit About QE Options Earlier This Month, November Minutes Show

The Fed minutes triggered a (very) minor bull flattening impulse, but Treasurys were mixed and the curve managed to steepen on the session. There was some quiet chatter on Wednesday afternoon that the minutes suggested the Fed isn’t quite ready to announce WAM extension just yet.

Expectations for a widely distributed vaccine and a concurrent recovery in global trade and commerce, as well as monetary policy convergence (i.e., the Fed is just as “easy” as its counterparts) have prompted the market to bet on a weaker dollar going forward. Anticipation for brisk global growth and reduced appetite for safe-haven USD assets further make the case, as does the old “twin deficit” argument, which is just the default, structural dollar bear thesis you lean on if someone presses you.

It’s worth considering that Yellen’s mere presence at Treasury could actually support the dollar despite what’s expected to be her active role in promoting more fiscal spending and working closely with the Fed to ensure conditions remain accommodative. When the world knows the hand that’s in charge of the greenback is a steady one, confidence could be commensurately bolstered, even as the actual policies Yellen pursues would be fundamentally bearish for the currency.

Despite the dollar’s decline, gold has simply failed to launch after a blistering summer run. In fact, it’s down nearly 3% in November and hasn’t put up a strong showing since July.

Most see the yellow metal’s recent stumbles as temporary. Credit Suisse says it’s just a “bump in the road,” while Goldman suggested Tuesday that we may have to see some actual inflation to reignite the rally. “The market may need a few solid CPI prints in the US or a large move in oil to reprice inflation higher,” Jeff Currie remarked, adding that “gold may continue to face pressure” in a “reflationless cyclical rotation.” That’s an amusing way to put it.

ETF outflows have contributed to gold’s recent slide, but the bull case is (more than) intact, according to almost anyone you care to consult.

For equities, you already know the story. November is on track to be the best month in more than two decades for global stocks, while the Russell 2000 is pacing for its best month ever, up more than 20%. The pro-cyclical rotation has meant outperformance for Europe, value, small-caps, and other beaten down sectors and styles, but the FAAMG-heavy S&P has still managed to put together one of its better Novembers on record.

The US now heads into what’s basically a four-day weekend, with a bit of trading squeezed in on Friday. One imagines the internet won’t be as full of ridiculous videos depicting crazed crowds beating down the doors for Black Friday sales this year. Or, at the least, you’d think retailers will have COVID precautions in place that will cut down on the number of physical altercations involving discounted flatscreens. For that, at least, we can be thankful.

Oh, and speaking of people who should be thankful, Donald Trump pardoned Michael Flynn on Wednesday evening. The move was expected. And that really says it all.