Here’s a notable statistic: If US equities post gains during the final two months of the calendar and then keep rising during the first two months of a new year, the S&P’s guaranteed to be higher still by year-end.

That bit of market trivia comes from Ned Davis Research. “Guaranteed” obviously assumes past is precedent. And assumptions have a very bad reputation. Caveat emptor.

The point is just that the history of rallies encompassing November, December, January and February doesn’t preclude additional gains for stocks in 2024. Indeed, the S&P rose over the ensuing 10 months each of the other 16 times the benchmark notched such a winning streak.

Trivial trivia aside, my guess would be that equities will find an excuse to pull back in the near- to medium-term. “We’re due” is about as lazy as analysis gets, but… well, US stocks were up 25% from the late-October lows through the beginning of this month. If that’s not “too far, too fast” then apparently there’s no speed limit anymore and no ceiling either.

To the extent the rally’s now manifesting in counterproductive ways that increase the risk of rekindled inflation through the wealth effect channel, the Fed has only itself to blame.

Note that one of the Fed’s own gauges of financial conditions still sits at pre-hiking cycle levels thanks to the easing impulse witnessed during Q4.

To critics, the dovish pivot late last year constituted a puzzlingly abrupt about-face. As late as October 19, Jerome Powell was telling David Westin that policy wasn’t too tight. You could tell, he said, because the US economy was still performing well despite the highest rates in decades.

Just a couple of weeks later, the very same Powell told reporters gathered for his post-November FOMC press conference that the September dot plot was stale, a clear indication that the Fed wasn’t inclined to squeeze in another hike after all. Later that month, Chris Waller started talking about rate cuts. Then, in December, the Fed cemented the pivot, tipping 75bps of easing in 2024. It wasn’t long before the market penciled in twice that.

Fed officials eventually succeeded in talking markets out of the idea that more than three rate cuts are likely this year, but by that time (so, by late last month) the train had long since left the station. Now here we are with what many insist is a mini-bubble at best and a new speculative mania at worst.

“The market perceives [the Fed] as having little credibility on policy tightening- / inflation fighting- willingness at this point, providing investors air cover to go ‘highly speculative’,” Nomura’s Charlie McElligott wrote Tuesday. “Accordingly, we see equities, Bitcoin and gold simultaneously making all-time highs, while USTs too stay well-supported with duration being bought on dips from real money types who see central bank asymmetry as an attractive risk / reward entry point, deploying back into fixed-income with yield pickup against long time-horizons.”

Fed officials may be waking up to the risk posed by another “everything rally.” Raphael Bostic’s “pent-up exuberance” warning from Monday referred specifically to businesses (not necessarily asset prices), but seemed to indicate some broader discomfort at the Fed around what even one 25bps cut might entail for animal spirits both on Main Street and Wall Street. It’ll be interesting to see if Powell echoes Bostic during his testimony on Capitol Hill this week.

The table above, from Nomura, gives you a sense of where positioning and exposure are extreme. The nosebleed ranks highlighted in green suggest “a number of investors [are] increasingly ‘chasing into highs,'” McElligott remarked.

As one Bloomberg blogger pointed out Tuesday while editorializing around the same Ned Davis note mentioned here at the outset, US shares have notched 15 records already in 2024. Thank Nvidia. And also Amazon. And Meta. And Microsoft.

But not Apple. No thanks to Apple. It’s fallen from the tree a little bit, down 8% for the year and around 15% from the highs. Apparently, Tim Cook’s foothold in the Chinese consumer market’s slipping. According to independent research cited by mainstream media, iPhone sales plunged by nearly a quarter in China during the first several weeks of 2024.