It’s Christmas Eve, marking the start of what has traditionally been the best seven-day sprint for stocks of the year – aka the ‘Santa Claus Rally’. So far, stock futures indicate a promising start to that ritual, but as this market is still a few days into 2020, anything could happen.
One event that could happen before Christmas is a post-Brexit trade deal. Investors are also looking at that $ 900 billion stimulus bill that President Donald Trump has expressed unhappiness about.
To our call of the day, which states: get ready for 2021 and the “year of the V.” It comes from Vincent Deluard, global macro strategist at financial services firm StoneX, whose collection of V’s contains a still-raging virus that sparked “one final deflation crisis in the first quarter.”
Deluard warns of a brutal first three months of the year in his December newsletter, predicting record COVID-19 infections and deaths and lockdowns on both sides of the Atlantic. He sees grim economic data for December and January leading to a sell-off in the large cyclical assets of gold and copper, and central banks are stepping in to avoid deflation.
But then relief comes in the second quarter, with vaccines unleashing pent-up demand leading to rapid reflation. That’s amid disrupted supply chains, demand returning to genuine goods, surging consumption due to record net worth and low redemption costs, and then massive spending cuts by major oil companies, putting pressure on the oil market, he said.
Deluard’s big advice? “Investors should now start collecting dirt cheap, inflation-sensitive assets. However, it may be wise to hedge cyclical risks with the antigrowth trade in the first quarter: long gold, healthcare and the yen against a short position [bearish] in oil futures, ”he said.
“In the second half, investors should focus on the best reflation and reopening trades: Latin American stocks (unhedged) and the IBEX 35 index, respectively,” said the strategist.
Here are more of his V’s for 2021 – valuations will matter, value stocks will finally shine, volatility will be the new norm, with the VIX or Cboe Volatility Index VIX,
which measures stock volatility above 20 for much of the year. Less than 20 often means that markets are not stressed. He also warns against vulnerable and overvalued bonds and many stocks and the bursting of the IPO bubble.
With those dear investors, you have a happy and safe feeling little Christmas.
The markets
Half a day for markets, stock futures YM00,
ES00,
NQ00,
are higher, with European markets SXXP,
mixed. GBPUSD, pound
is up and the FTSE 100 UKX,
boils down to that hope for the Brexit deal.
Read: This is what a Brexit deal means for markets
Asian stocks usually ended higher, except in China like Alibaba BABA,
slipped when regulators launched an anti-monopoly investigation of the e-commerce group.
Read: Which markets are open and when during the holidays
The buzz
A post-Brexit trade deal between the UK and Europe may finally be here, after marathon talks.
There may be good news on the COVID-19 front, as a few studies indicate the infection may protect against reinfection. That’s because more than 1 million Americans have been vaccinated. Meanwhile, the UK is extending its lockdown as a second, even more contagious species, believed to be native to South Africa, spreads.
Digital payment group Square SQ,
has reportedly expressed an interest in buying Tidal, Jay-Z’s music streaming service.
Nuro is the first company in California to be approved to operate a driverless delivery business.
President Donald Trump granted even more pardons on Wednesday, bringing the total to nearly 50. Former campaign chairman Paul Manafort and Charles Kushner, father of his son-in-law Jared, are among the latest recipients.
The graph
Random reads
A digitally created queen breaks into a TikTok dance to make a point about deepfakes
A ‘dragon’ and a cure for cancer. What a mystic who predicted the September 11 attacks said about 2021
Need to Know starts early and updates to the opening bell, however Register here to have it delivered once to your email box. The emailed version will ship at approximately 7:30 a.m. East.
Do you want more for the day ahead? Sign up for The Barron’s Daily, a morning investor briefing, including exclusive commentary from Barron’s and MarketWatch writers.