Weekly eLetter 12/4/2020 – The Paralysis of Analysis

As I pondered the title for today’s missive, I was torn between the title that appears above and my first runner-up – “The Pause That Refreshes”. Stuck then I was, realizing the irony of my dilemma: Having created my own writer’s block, I could go no further until I made a decision.

The irony was pretty close to perfect. After all, the entire point of my piece to you today is how the major trading markets this week have been sort of stuck. As if they’re waiting for a whack upside the head. Or something.

As it turns out, the lack of movement in the markets was not produced by a lack of interest as trading volume was pretty normal. The situation seemed to be a plethora of non-competing and non-complimentary forces. Here are a few examples;

  • Equities had a blockbuster, (indeed record-setting) November while, concurrently, the rebounding COVID-19 threat was running amuck.
  • Unemployment continues to fall but mandatory lockdowns increasingly make going to work impossible for millions.
  • The Big Election is over, but not really according to some.
  • Pelosi asks for a 2.2 trillion buck relief package but Biden is OK with 900B.
  • If you are an old-schooler, you are fear-struck at a 52% drop in ‘footfall’ at retail stores’ dismal Black Friday attendance but if you are a new-schooler you see total sales actually increased thanks to online activity.
  • Still others gawk at their presumed over-valuation of Tesla — while Goldman Sachs raises the auto maker’s target price from $455 to $780.

The list goes on and on. Data and analytics provide us with what we convince ourselves is science. We look elsewhere to find faith.

And yet we have this: December is reliably an ‘up’ month for markets. Some of that can be chalked up to clearing house, housekeeping and tax related alignments. More important is the fact of 4th quarter corporate earnings being generally good. This year is no different except for that fact of a record setting November raising the bar higher for December.

Yes, while 2020 has proven to be an annus horribilis, it has also given us the proof of the American spirit’s ability to tackle adversity and come away victorious…so far. Watch this space.


Ron’s Market Minute — Near the End

The last month of the year has begun. Usually at this time of year I comment that I can’t believe how fast the year flew by. However, 2020 hasn’t conformed to any historical norms. It feels like the year that just won’t end. The year that time stood still.

December is the second month of the strong seasonal period of November through April. December is also one of the strongest months of the year. Going one step further, December is the second strongest month after November when starting the month in an uptrend, like now. It is very difficult to have a negative catalyst lead to a bad December, but it is not impossible as we saw in 2018 with a complete collapse in December. Recall then that Jay Powell and the Fed were stubbornly and wrongly hawkish on interest rate, a position he and they quickly reversed a month later after stocks cratered 20%.

The stock market has run very hard and very fast since the October 30 bottom. I know my readers are not surprised. It has been an epic rally without any pause. Unless the market is going hyperbolic, the rally should moderate, pause and even mildly pull back. Seasonally, stocks usually see a peak this week with some softness for a few weeks before rallying into year-end, aka the Santa Claus Rally (SCR) which I plan to be writing much about in the coming weeks.

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
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Phoenix, AZ 85051
Phone (602) 252-8700
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www.denkinvest.com

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Ron Denk is a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

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