The Latest On The Global Economy: Slow & Disruptive For Most People But Rewarding For Shareholders

While shopping is difficult this holiday season the wealth effect is in full gear, pointing to continued economic growth into 2022 unless the Fed takes the punch bowl away. The volatility risk premium points to a higher market over the next few days (though volume may be light as we approach New Year’s and since the VRP could easily reverse and catch investors offside), while my technical reading of key stocks in the S&P 500 is bullish. There was just one negative factor across global asset classes yesterday: gold is signalling inflation fears. Expect the S&P 500 to continue to rise modestly over the next few days.

Profit estimates continue to rise in the US as firms wring out costs and make the most of this disrupted holiday season. While this stirs the political hornet’s nest of inequality it also points to the robust nature of the US economy, which is key for the global economy since the US is the world’s major importer of goods. Regional diffusion indices continue to point to modest but persistent strength across the US, and home sales and prices have dropped off modestly from their earlier robust pace, indicating the same. Consumer confidence is still low but improvement in the labor market likely builds confidence in the new year, particularly if Omicron continues to be a milder variant of COVID than feared. Earnings season begins in a few weeks and will likely show most large firms made their goals and are well-positioned for 2022.

My current market positions include a large cash position, and the following holdings: Activision (ATVI), Amgen (AMGN), American Express (AXP), Johnson & Johnson (JNJ), 3M (MMM), Titan Machinery (TITN) and a small net long position in the S&P 500 (the levered inverse ETF SPXU and levered ETF UPRO).