Dear Readers,
These final days of the year are typically uneventful and this year is proving no different. So, while December thus far has been positive for the market, I am not looking for sharp moves in either direction. Keep in mind though that low volumes can exacerbate volatility readings.
We had a couple of soft economic reports this morning, but they don’t seem to be getting much traction. The more signficant of the two, in my view, is the Conference Board’s Consumer Confidence Index for December. The expectation was for a gain over the November level, but instead we got a loss. This is a surprise reversal of the favorable trend in this key series in the last few months. Consumer confidence had been steadily improving recently, as reflected in the overall favorable retail sales picture thus far this holiday season. But with unemployment rates in the 10% vicinity, it will take a while for confidence to get back to ‘normal’ levels.
China’s Christmas Day rate hike created some excitement on Monday. But it was largely expected, notwithstanding its unusual timing, and failed to produce a lasting trading impact. My sense is that this rate hike, the second in as many months, will be followed up by three or four more in 2011. China’s ability to rein in its inflationary pressures, without impacting its economic growth prospects, will be the big story in 2011. It will be interesting to watch the commodities sustain recent gains in the face of Chinese tightening.
2010 was bumpy, but overall quite good. I am getting ready for a much better 2011.
Happy Holidays,
Sheraz Mian
