While many peoples’ look back at 2020 draws a “good riddance” farewell, the stock market in general performed brilliantly up to and including all time record closing prices on the last trading day of the year. The extraordinary market strength came despite:

  • a once-in-a-century killer pandemic, also at its highest level of the year on December 31,
  • an economy sputtering badly because of the pandemic,
  • an unusually bitter presidential election with an unprecedented aftermath.

Bottom line, the markets tell us again that their bullish eyes are fixed more on what it thinks “will be” than on “what it is” now. The naysayers, too, have their reasons:

  • Although the stock market has recovered, the main stream economy is far from recovery with high joblessness and high need for fiscal stimulus help,   
  • Extreme market optimism. One measure of a frothy (overbought) investment situation is investor margin borrowing. As of November 2020 this metric was at $722.1 billion… the highest level ever.

As noted in last week’s “Conformings” report, the direction of the first 5 trading days of January very often correlate with whether the markets will be up or down for the entire year. If we judge this as more than coincidence, we’ll be watching next week’s market action with unusual interest.

In terms of this week’s market condition, we used the high volatility settings to scan the conforming credit spreads. Premier Members can view the screening reports of conforming credit spreads, and others can join us to test-drive free for 30 days.