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Stay Vigilant

Market seems to have accepted that his sore loser attitude is just pretty much another anomaly in a weird presidency but the risk that the situation may escalate is not zero

Although the risk melt-up continues to proceed steadily, this is no time to get complacent. Trump and his lawyers continue to dispute the results of the US elections despite the various lawsuits that keep getting thrown out from courts due to lack of merit and evidence.

Market seems to have accepted that his sore loser attitude is just pretty much another anomaly in a weird presidency but the risk that the situation may escalate is not zero. Keep to the path but remain vigilant.


  1. Gold & Silver — Major support for Silver remains at 21.80–90. Gold support is at 1750–60. Gold traded well despite the slight recovery in USD. Encouraging price action for a change.

Key risks — Higher US interest rates and a stronger USD remain the key risks.


Market Movements as of New York Close 8 Dec 2020
  • Sterling whipsawed while trade negotiations are deadlocked. Its fate now rests on whether a dinner between British Prime Minister Boris Johnson and European Commission president Ursula von der Leyen in Brussels can deliver a breakthrough. Other majors mostly held their ground, and the EUR and the Antipodean (AUD & NZD) currencies took a breather after the recent relentless rally.
  • Regarding stimulus, Senate Majority Leader McConnell suggested that the Senate should drop both liability protection and state and local government funding from a stimulus bill since there are so many disagreements on those issues. McConnell previously advocated for liability protection, but it was uncertain if Democratic leadership would similarly concede on the latter.
  • S&P 500 (+0.3%), Nasdaq Composite (+0.5%), and Russell 2000 (+1.4%) closed at fresh record highs on Tuesday amid more encouraging vaccine news and a hopeful-sounding stimulus update.
  • The positive vaccine coverage started with Pfizer (PFE 42.56, +1.31, +3.2%) and BioNTech (BNTX 128.11, +2.41, +1.9%), although the S&P 500 was down 0.4% at its low despite the news. Briefly, the UK began inoculating its citizens with the Pfizer-BioNTech vaccine, and the FDA said it saw no safety concerns for that vaccine that would preclude issuance of an emergency use authorization.
  • Next, peer-reviewed data published in The Lancet Journal indicated that the AstraZeneca (AZN 54.72, +0.46, +0.9%)-Oxford vaccine is safe and effective in preventing symptomatic COVID-19 and that it protects against severe disease and hospitalization. The S&P 500 turned positive shortly after this second headline.
  • The energy sector reclaimed its recent outperformer status with a 1.6% gain, which was emblematic of a lingering recovery optimism. The influential information technology sector advanced 0.4%, while the real estate sector lagged with a 0.5% decline.
  • Separately, investors were cautioned that Tesla (TSLA 649.88, +8.12, +1.3%) announcing a $5.0 billion common stock “at-the-market” offering program was symptomatic of stretched equity prices, but for a stock blessed by animal spirits, shareholders thought differently. TSLA shares closed higher after being down as much as 3.6% intraday.
  • Japan is likely to sell a record amount of new government bonds exceeding $960 billion in the current fiscal year due to plunging tax revenues, the Nikkei newspaper said on Wednesday, underscoring the heavy toll the coronavirus pandemic is taking on the economy.
  • FedEx Corp — and its rival United Parcel Service Inc — have enough air cargo capacity to handle COVID-19 vaccine deliveries, FedEx Americas President Richard Smith said on Tuesday. FedEx and UPS are key partners to the U.S. government’s Operation Warp Speed vaccine project and will move millions of doses for Pfizer Inc and other pharmaceutical companies. Experts predict that the unprecedented size of the COVID-19 project will test the nation’s cold-chain shipping capabilities.
  • Republican Senator Marco Rubio and Democratic Representative Jim McGovern on Tuesday sent letters to Intel Corp and Nvidia Corp seeking information on the sale of advanced computer chips allegedly used by China to conduct mass surveillance on Uighurs in the country’s remote Xinjiang region. The United Nations has estimated that more than a million Muslims have been detained in camps in the Xinjiang region. The U.S. State Department has accused Chinese officials of subjecting Uighur Muslims to torture, abuse “and trying to basically erase their culture and their religion.”



President-elect Joe Biden on Tuesday laid out his plan to fight the coronavirus pandemic during his first 100 days in office, saying his administration would vaccinate 100 million Americans, push to reopen schools and strengthen mask mandates.

At a briefing in Wilmington, Delaware, Biden said he needed Congress to fully fund delivering vaccines to all corners of the United States. Getting children back to school will be a national priority in the first 100 days, Biden said.

“In 100 days, we can change the course of the disease and change life in America for the better,” said Biden, who takes office on Jan. 20. “Whatever your politics or point of view, mask up for 100 days.”

THEMATIC CONTEXT: “U.S. states seem to be moving along a constructive trajectory by implementing curbs in the face of rising hospitalization rates. The requirement by the Californian state to wear a mask is a positive development. A Biden administration will probably help the U.S. turn the bend and such a scenario is extremely bullish for risk sentiment.” — 8th Dec 2020


The Trump administration proposed a $916 billion coronavirus relief package on Tuesday, after congressional Democrats had shot down a suggestion for a pared-down plan from the Senate’s leading Republican, Majority Leader Mitch McConnell.

U.S. Treasury Secretary Steven Mnuchin said he presented the administration’s $916 billion plan in a conversation with House Speaker Nancy Pelosi, a Democrat. Writing on Twitter, he said it included money for state and local governments, a Democratic priority, and liability protections for businesses, a Republican priority.

Republicans and Democrats face mounting pressure to deliver a fresh infusion of aid to families and businesses reeling from a pandemic that has killed over 283,000 people in the United States and thrown millions out of work.


The U.S. Supreme Court on Tuesday handed a defeat to Republicans seeking to throw out up to 2.5 million mail-in ballots in Pennsylvania as they try to undo President Donald Trump’s election loss, with the justices refusing to block the state from formalizing President-elect Joe Biden’s victory there.

“This election is over. We must continue to stop this circus of ‘lawsuits’ and move forward,” Pennsylvania Attorney General Josh Shapiro, a Democrat, wrote on Twitter.

The Supreme Court also must decide what to do with another election-related case brought on Tuesday. Republican-governed Texas, hoping to help Trump, mounted an unusual effort to overturn the election results in Pennsylvania and three other states — Georgia, Michigan and Wisconsin — by filing a lawsuit against them directly at the Supreme Court.


The Bank of Canada will hold its last policy meeting of the year later today and markets are almost certain that no shift will take place as growing post-Covid prospects are outweighing the current virus resurgence. Should the Bank adopt a more optimistic tone, the CAD may seek fresh highs.

Unlike the US and the EU, however, Canada is not facing serious fiscal disputes, and this has allowed the government to peacefully approve a new stimulus package last week. The finance minister Chrystia Freeland topped up existing programs with another C$25 billion to help Canadians get through the winter and pledged to spend up to C$100 billion more in the next three years and after a vaccine is distributed. Implicitly, the fiscal contribution removes some pressure from the Bank of Canada’s shoulders. Policymakers may feel more comfortable in adopting a wait-and-see approach.




Market Observation

U.S. Fiscal Situation

Bassman wrote:

The chart above borrows from a scholarly report by James Moore, PhD. The blue bars are the total US Treasury debt outstanding while the lines are the projected Social Security deficit. From the Social Security Trustees (SST), the orange line is their base-case while the grey line represents the SST’s high-risk scenario. Both were calculated using historical assumptions for interest rates, inflation, and economic growth.

The red line is the result of using current market-based inputs for interest rates and inflation. Notice how this estimate was between the SSTs base-case and high-risk scenarios until 2010, but the impact of the Great Financial Crisis (GFC) exploded the future liability.

Source: Convexity Maven Wages of Fear

What caught our attention is that Bassman’s chart comes to the same conclusion we have: The US Entitlement position is unsustainable, even as the headlines continue to suggest it is politically impossible to resolve this problem via cutting of entitlements.

Simply put, COVID has made US Entitlements unsustainable, and simultaneously made them politically impossible to cut. As such, “actions to prevent US economic devastation” are likely to amount to the Fed increasing its financing of US deficits as Entitlements move from being off-government balance sheets (off balance sheet refers to the assets, debts or financing activities that are not presented on the balance sheet of an entity) to on-government balance sheets at an accelerating pace in coming quarters. As Yellen knows all too well:

We are watching the “print the money or trigger the revolution” moment occur in the US, in real time…

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Phan Vee Leung
CIO & Founder, TrackRecord




Our market summary condenses the most important market events into a short read.

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