Is Santa going to sign in at all this Christmas?

Over the weekend, I published a Deeper Dive laying out a number of reasons for paid subscribers that I think the stock market is perilously close to a major plunge. In the very least, I suggested Santa Claus looked like he was leaving his usual post-Christmas rally behind with his tail between his legs or his flask in his hand as he sauntered off drunkenly because the high-rolling stocks are looking a little tipsy.

This morning, the market took the plunge. Morning news revealed that Santa Claus is a drunken mess in terms of his usual (75% chance of a) glorious and easy rally right after Christmas and heading into the New Year. The stock market re-opened with a big 500-point plunge for the Dow, which quickly became 600 points and is growing deeper as I write this morning’s editorial.

The big leaders in Tech are taking the market down the most, but breadth, as one article today points out, is also terrible, with most of the market now collapsing. The supposedly indomitable AI stocks (as was claimed to be the case for them by nearly everyone last summer) are getting pounded hard with Nvidia down 2%, going into the weekend. High-tech Tesla did even worse, closing down 5% lower, going into the weekend, and both stocks are now falling more this morning.

It looked bad right from the top of the morning, yet completely in line with what I was expecting:

US equity futures dropped sharply on the second to last day of 2024, crushing a deathly blow to any hopes of a belated Santa rally, as the powerful meltup in technology shares and among momentum chasers crumbled in the final trading sessions of 2024.

The stock market blowing apart at the end of the year is hardly the major rally that Trump was greeted with last time he became president, which he took great pride in. This time is different. Investors are concerned about what his widespread tariffs will do to markets and the economy in general. Widespread debt, doubled and tripled down on by Biden, shows no sign that it will actually back off under Trump, who plans to cut income taxes more and make up the difference with tariff taxes. That is making bond investors nervous.

These concerns have been driving up bond yields in total uncooperation with the Fed at a time when the Fed is trying to cut interest rates, which is causing bond yields to compete with stocks as the new easy money on the table. The yield curve, which I recently noted was almost completely uninverted, is now, finally, completely uninverted, as usually happens before a recession.

Bond investors are nervous about two things that are driving up interest on the long end—the prospect that inflation now runs higher for longer and the prospect of the US government, already running out of money by mid January, having to raise endlessly larger amounts of debt at a rate of acceleration we’ve never seen before this past year.

That said, the stock market is closing a very strong year, but that has been no real surprise here, lunatic as it is, being based largely on fraudulent statistics put out by the Biden administration on jobs and on real GDP that hasn’t been real in a long time due to taking out too little inflation, but particularly so of late. I did not predict any trouble for stocks in 2024, so am not surprised. When lunacy reigns supreme, betting on the timing of a fall isn’t such a good idea, but it’s looking quite likely soon with the market being as overstretched in every way as it is and few reasons left for valuations to rise, as I laid out.

For example, as noted in my latest Deeper Dive, real GDP could fall precipitously if headline inflation keeps rising so that more inflation is getting subtracted out, and stocks are already astronomical relative to GDP. I also noted for paying subscribers a other enormous mismatches between stock valuations, earnings, historic norms, etc.

The strength of the past year for stocks can be seen here:

The major averages are heading into the yearend shy of record levels, with the S&P 500 and Dow up more than 25% and 14%, respectively, and on track for the best year since 2021. The Nasdaq has gained more than 31% in 2024.

The benchmarks are also headed for a winning fourth quarter, with the Nasdaq on pace for its longest quarterly winning streaking since 2021.

But can the market make a third strong year in a row? It’s happened, but it is rare; and this market faces some real challenges and headwinds. As noted in the Deeper Dive it is showing a lot of fragility and is facing headwinds from competing bond yields now that the bond vigilantes have wrested all control from the Fed’s white-knuckled fingers.

Only two sectors out of the 11 that comprise the S&P 500 were positive in December. Those were Consumer Discretionary and Tech, and Tech is now crumbling rapidly. Tech was essentially the ONLY thing holding the market positive.

Put simply, the only reason the S&P 500 is holding up is due to a handful of large tech plays that receive a tremendous amount of weight in the index. When you remove the impact of these companies by referring to an equal-weighted S&P 500, it’s clear a bloodbath is unfolding.

With Tech now removing itself, this could be bloodbath that we are seeing now.

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Santa Is a No-Show for those Stocks Hung by the Chimney with Care

Economania (national & global economic collapse plus market news)

Real-Estate Rubble (housing, commercial & global real-estate bubble trouble)

Money Matters (monetary policy, metals, cryptos, currency wars & CBDCs)

Inflation Factors (due to too much money chasing too few goods)

Wars & Rumors of War, Revolts, Hacks & Cyberattacks (+ AI threats)

Political Pandemonium & Social Senescence (socio-political issues & events)

Globalism & Deep Domination (undemocratic government & censorship)

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