Nasty Clouds Over Eurasia Allow For Blue Skies Over Western Markets: The Action For December 19, 2023

Eurasian manhandling of businesses make the top right of the Times this morning and that along with energy shipping disruptions in the Middle East point to a rocky road for capitalism as autocrats gain sway across the world. Yet the European and American equity markets are raging higher, a classic case of investors discounting the worst from politics and breathing optimism from business efficiencies and the unstoppable American consumer. With the major inflation data point 3 days away the holiday spirit likes dominates markets as the S&P 500 makes a play for the all-time highs around 4800.

The bulls have control for the moment as most indicators are mildly bullish and just a few tilt toward strong growth, namely:

• BTP-Bund Spread Of Italian & German Bonds: Italian default risk and a corresponding crisis for the Euro are muted, which is critical for European stability and is good for global growth.

• Liquidity Metrics: Measures of money flow across the globe are trending upwards lately, which helps equities.

And based on the action yesterday and overnight there is practically nothing but geopolitics getting in the way of the bulls. My current positions reflect my intermediate-term bullish forecast, and include 3M (MMM), Pfizer (PFE), and a large position in UPRO that is partially hedged by an offsetting position in SPXU, which nets out to a long position in equities.