After a strong recovery from last week’s washout, the incredible, 3-day rally we’ve seen is fizzling out in the early going today. Traders that bought the dip are taking profits at/near the top end of the ranges. Traders that were a bit early (myself included) were happy to unload for smaller losses. Covid fears, talks of ramping up the taper, debt ceiling woes, and increased global tensions were just a few of the reasons markets finally put in a meaningful correction.
A week later, the omicron variant seems to be milder than past variants. While some parts of the world will likely handle things differently, it appears we will avoid lockdowns domestically barring some other news. Taper talk will be addressed following the FOMC’s two-day meeting next Tuesday and Wednesday. Debt ceiling theater continues, but that is usually nothing more than that. Theater. President Biden and Putin met via Zoom, but initial reports lack any indication things are calming down at the Ukrainian border.
So where do we go next? Does the Santa Claus rally take us higher? Will Powell indeed “double down” on the taper as some have suggested? It’s hard to say, but I think it is a good time to keep positions light until a clearer picture emerges.