Outlook: The lack of a strong Santa Claus rally has many investors considering a potential top in equites. I am not convinced. Simply put, the Fed spooked markets with a pivot back to higher for longer. The action is somewhat reminiscent of the forward guidance from an easing cycle to a hiking cycle at the end of 2021. The actual impact should be quite different, however. While I don’t expect monstrous gains from equities this year, I do think fears of an impending recession are overblown. January’s month end performance should shed light on whether my outlook is headed in the right direction.

Equities: The downward adjustment to equities following the Fed pivot should be nearing its end. Statistically, the first week of trading in January generally predicts a positive or negative outcome at year end and is typically mirrored by month-end performance as well. Bullish.

Dollar: The Dollar continues is strong rally which may have to do with the US being the only investible market. I stand by my call that the dollar is at or near its peak. Bearish.

Yields: Treasury yields continue to mirror the dollar. Eventually the higher for longer pivot will weigh on economic output. Bearish.

Commodities: The broad commodity complex is on the verge of breaking out, buoyed by natural gas and higher lows in oil. Bullish.
Crypto: Contrary to historical norms crypto largely bucked the trend in December, finishing down. It’s likely that November’s outsized gains cannibalized returns for December. January should be a strong month. Any lackluster performance, however, will suggest extreme caution and perhaps even an immediate exit. Neutral.