And So Ends The Worst Year In Modern History

With many markets shut for New Year’s Eve, the world closed the book Thursday on what will rightly be remembered as one of the worst years in modern history.

But the story for asset prices was a tale written by central banks, something former Lehman trader Mark Cudmore emphasized.

““Don’t fight the Fed’ is a market adage every trader learns early in their career. It has much greater meaning than ever before,” Cudmore said. “As central bankers became increasingly unable to influence inflation in line with their mandates, they turned to directly impact what they do have control over: markets.”

On March 23, the day the Fed stepped in with open-ended QE and unveiled corporate bond-buying, I wrote that “there will be plenty of finger-pointing when this crisis is over [but] nobody will be able to accuse Jerome Powell of not taking the most drastic measures imaginable, even if there will be a veritable chorus of folks accusing the Fed of ignoring moral hazard.”

I think it’s safe to say that assessment turned out to be accurate.

Of course, not all assets benefited equally. As in society, the disparity between the “haves” and the “have nots” was vast indeed.

While it’s tempting to point to November’s outperformance for laggards like value and small-caps as evidence that the rally’s composition is changing, Credit Suisse’s Jonathan Golub estimated that, in fact, value’s purported resurgence was really just the product of “four ‘good news’ days” around vaccine readouts and Janet Yellen optimism.

Indeed, a look at the growth/value disparity shows that while the trajectory has perhaps calmed down and (dare I say it) leveled off, 2020 was the year the ratio went parabolic.

Again: The pandemic accelerated existing trends in markets, just as it did in society. And those trends fed on one another, sometimes to deleterious effect.

As Bloomberg wrote Wednesday, citing Vincent Deluard, “over 10 months of chaotic swings, companies whose profits rely least on people beat those that depend the most by 27 percentage points.”

And yet, ultimately, it was people who helped us survive 2020. And not just central bankers.

AxiCorp’s Stephen Innes emphasized as much in a Thursday note. “Although US stocks are notching year-end record highs, I suspect everyone is more than happy to slam the door shut on a devastating 2020 and hide it in our deepest memory recesses,” Innes wrote, adding that “besides lavishing policymakers with praise for the extraordinary monetary policy and fiscal stimulus which provided the fundamental tailwinds to float us out of the COVID economic abyss, do try to keep those folks who worked tirelessly in healthcare and medical research in your debts, as without them, we would not be here getting ready to pop the champagne corks.”


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19 thoughts on “And So Ends The Worst Year In Modern History

  1. Fingers are crossed you will be.

    Happy new year everyone and a big THANK YOU to Mr. H. for your excellent coverage of a truly remarkable year.

    stay safe.

  2. Correctly or incorrectly, I think of you as the Anthony Bourdain of economics and Wall Street.
    Will 2021 bring “Wall Street Confidential”, an autobiography by H?

    1. I have an autobiography. Or at least the first 4 chapters of one.

      Finishing it and releasing it is another matter.

      I do plan to do so at some point. It reads a lot like the opening vignette from this post:

      If you like the first 8 paragraphs of that (and the last several paragraphs) you’d like the autobiography.

      Incidentally, I have an entire line of sweaters and shirts based on the first part of that post ready to launch to celebrate the New Year.

      Hopefully, those will be available within in the next 48 hours.

        1. The merchandise is already here, in case you missed it:

          Those are the initial 7 designs, and you can get those now.

          What’s coming either tomorrow or, at the latest, over the weekend, are two whole “collections” (if you will) called “Cheers” and “Signal.”

          Just drop me an e-mail if you want to be notified when those are available. The other stuff (from that link above) is already available.

      1. Dr. H, you should go for it. I imagine it sort of as if Denis Johnson was incongruously embedded in the heart of the complex global capitalist system during its apogee, and then epic decline and fall. Like the original memoirist, Duc de Saint-Simon, it might later be read as a clear thinking refraction of a defining period of history, assuming humanity survives this millennium.

  3. I remember reading that post when first published- loved it.
    Still waiting for a tshirt I can buy from you- something along the lines of ‘left leaning libertarian’

  4. Raised by writers or, more specifically by books, I have been saddened by the steep fall in the quality of writing in this age of the internet.
    It’s like seeing one’s parents entering dementia.
    If I was grateful to this site for nothing more than it’s coherent and correctly spelled writing it would be enough.
    The sane voice and interesting content makes it great. As if I’ve found an uncle in the family who didn’t get the disease.
    Thanks much and Happy New Year.

  5. Reread the post from January 25th 2020 and it ‘s comments and it is well worth the time as twelve years have gone by since the GFC and context is everything in what we discuss on this blog.. We all had reactions to the goings on at that time and they reflect to a large part life experiences which differ… The usual A+ for literary stile is warranted . Hope you don’t tire doing what you do as most all your readers find unusual benefit.. Happy New Year !

    1. These comments have inspired me to write a sequel to that post.

      I think I’ll publish it on the one-year anniversary and release the matching apparel on the same day.

  6. Your headline was especially fitting for me because my wife of 54 years died last year on this date at the hour I write this. I guess I got an early start on the Plague Year (no diary yet). Speaking of that, I would really like to read your bio. I suspect it will describe an interesting journey.

    All the best for a better new year. In a time of so much fake news I tend to think of you as a latter day Diogenes, one of the few honest men of whom I am aware.

  7. I would be a much much poorer person without your writing, and not just financial. Sincerely hope you never tire of it.

    Thank you and A Happy New Year!

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