One Foot In Front of the Other

Yesterday was a pretty interesting day on two levels: one, commodity related equities (ILF, GSG, XLE, AMLP, PICK) rose sharply while Bonds rallied (AGG, TLT); two, the IPO frenzy continued with Airbnb following Doordash into the stratosphere while Blackrock announced it was recommending a tactical equity overweight.

In the first instance someone will clearly be proven wrong (my bet is the bond market) while in the second both can be right over time but when everyone seems to be on the same (bullish) page a player as big as Blackrock just going OW now suggests there is a lot more where that came from. JPM agrees & forsees $1T in equity inflow/demand in 2021.

So much big picture stuff to cover - we are in policy driven markets: health policy rules, fiscal policy follows and monetary policy comes in third as we were reminded with yesterday’s ECB decision which elicited a few yawns in Europe and not even that here.

Policy driven markets means politicians are players and so here’s a political process primer: endless bickering on the same topics until someone screams Uncle and the deal is done, to wit: Brexit and fisheries… really? Or business liability protection in return for state and local aid in US stimulus talks - this has been the clog in the drain for months… it's amazing really. I discuss this and more on Bloomberg Radio .

Well as one learns in the high mountains, the strategy is to keep putting one foot in front of the other - in other words to keep going. Europe has done just that in agreeing to a huge $2.2T budget/JRF package while strengthening its Green Deal. It took all night but it got done. It's a HUGE deal that sets Europe up policy wise for the coming 3-5-7 years & emboldens us to repeat our view that Europe has (an ever better) chance to win the 2020s.

Oh and just in case anyone was wondering which is more important - it only left 10 minutes for EU leaders to discuss Brexit. For all but the UK, Brexit is a side issue - if there is no deal this weekend and a sell off results - I have two words for you: buy it.

Europe is the epitome of the Tri Polar World’s (TPW) one foot forward region as it seeks to become the world’s normative power (rule setter for those who don't have a poli sci degree). Asia is TPW’s consumption region: China’s DCS, the RCEP deal, a strong RMB serving as the lodestar of a regional currency bloc - as in Europe, it's all starting to take shape as China TSF expands 13% y/y while X soar 21% y/y & S Korea’s early Dec X rise 12% Y/Y on an adjusted basis. Asia leads the global economy - 1st in, 1st out.

Here in “post truth” America one wonders what the TPW case is for the Americas? In an America First age that was an easy question to answer even if you didn't like the answer. Now it's up to Joe Biden - in a way it's nothing but upside though 4 years of partisan gridlock would really set the US and Americas back relative to Asia and Europe.

Here’s a crazy idea - how about the US helping its neighbors in Latin America with the vaccine rollout? Build goodwill, let folks know the US “is back”, turn the page on the socialist rant and start to think strategically.

On the plus side the Fed did report that US household net worth (HNW) hit another record in Q3 helped by surging house and stock prices, good news for those who own one or both. It took only two quarters to recover from the Covid collapse while it took nearly 5 years for HNW to recover post GFC. We are climbing a different mountain.

Two other things that struck me this week: the lack of market reaction to the UK’s start of the global vaccination process & the brushoff markets gave to the news that the US was suing Facebook on antitrust grounds. Maybe it's fatigue, maybe it's the rush into YE, even in Covid Age, maybe it's those rocking IPOs but I gotta think the market is missing the big picture in both.

Successful vaccination processes will literally change the world - no way it's priced in. Second, there are two bipartisan issues in Washington DC today: anti China and anti tech. Tech, FANG tech anyway, is already facing the “kryptonite” of vaccines and rising rates ( someday soon); our tech focus is on Innovation & Disruption not Domination.

Hey, if you missed yesterday's 2021 Outlook webinar don't worry - it's all here , including how the Global Economic BOOM sets off the Great Rotation & unlocks a “Golden Age” for asset allocation. I come on around min 25 but the EMQQ part is also worth a listen - especially the valuation comparison between EM tech & FANG tech.

Here’s to hoping I can go to the gym on Monday and then to my Italian place for lunch indoors!