Happy Holidays

Another year is almost in the history books and there was no shortage of history made in 2023. China’s Xi Jinping clinching an unprecedented third term, U.S. intercepting Chinese spy balloons over South Carolina, the successful launch of SpaceX’s Starship (the most powerful rocket ever built), a U.S. regional bank crisis causing market turmoil and forcing the Fed to intervene, and Kevin McCarthy being the first Speaker of the House of Representative to be removed from office are a few highlights.

Canadian investors may be forgiven for believing they were on a year-long seesaw. The S&P/TSX swung from gains and losses over the last twelve months. Same goes for the U.S. broader markets, where a similar pattern occurred.

Excluding the magnificent seven - Apple (AAPL), Microsoft (MSFT), Google parent Alphabet (GOOGL), Amazon.com (AMZN), Nvidia (NVDA), Meta Platforms (META) and Tesla (TSLA) – the remaining 496 stocks in the S&P 500 (despite its name, the S&P 500 rarely has 500 constituents, as of December 18, there are 503) had a challenging year, swinging from gains and losses.

Of course, November changed everything for almost every asset class. Stock and bonds surged as the U.S. Fed officially declared they were pretty much done raising interest rates amid apparent evidence that inflation is moving towards its target. Not only are they done, but the Fed projects rate cuts are a distinct possibility in 2024.

As we wrote in our final note for 2022, “Inflation was going to be the defining economic factor that could make or break the market in 2023.” A clear sign that inflation is moving toward 2-3% target and a slowdown in economic activity, gave the Fed the green light to signal to the market they are in a holding pattern, and depending on the financial conditions, rate cuts could be coming in 2024.

Easing monetary conditions was music to financial assetsears including our clients at Cadence, helping 2023 to close out the year on a solid note.

As eventful as 2023 was, we suspect 2024 will offer plenty of surprises. We will outline how we see 2024 evolving during our next webinar hosted on Tuesday, January 16th (click here to register—https://raymondjames.zoom.us/webinar/register/WN_2q8cA-A_RDumhfabmStPNA#/registration).

In the meantime, we wish you all a happy and safe holiday season and hope you enjoy our version of Dr. Seuss' How the Grinch Stole Christmas with a financial twist.

How the Grinch Stole Christmas

Every Bay Street trader
Down in Bays-ville
Liked year-end Christmas rallies a lot

But the Grinch,
Who lived just north of Bays-ville,
Did NOT!

The Grinch hated Christmas or any notion of a Santa Claus rally!
Now, please don't ask why. No one quite knows since he lost his largest client, Sally.
It could be his distrust of Congress' printing press.
It could be, perhaps, that high-yield debt was not very distressed.
But I think that the most likely reason of all
May have been he had just read Nassim Taleb call for an economic stall.

But, whatever the reason,
His pessimism or the fiscal policy treason,
He stood there on Christmas Eve, hating the Bay Street traders,
Starting down from his mid-town office with a sour, Grinchy frown
At the warm-lighted windows across the downtown.
For he knew every Bay Streeter down in Bays-ville beneath
Was busy extending longs below the mistletoe wreath.

"And they're counting their profits!" he snarled with a sneer.
"Tomorrow, they'll expect a Santa Claus rally! It's practically here!"
Then he growled, with his Grinch fingers nervously drumming,
"I MUST find some way to stop this rally from coming!"

For, tomorrow, he knew…

…All the Bay Streeter girls and boys
Would wake bright and early. They'd rush for their terminals!
And then! Oh, the noise! Oh, the Noise! Noise! Noise!
That's one thing he hated! The NOISE! NOISE! NOISE! NOISE!

Then, the Bay Street traders, young and old, would sit down at their conference tables.
And they'd talk about bidding up the British Cable
And they'd bid, And they'd bid!
And they'd BID!

They would bid up the Cable and stocks in the Far East
Which was something the Grinch couldn't stand in the least!

They'd do something
He liked least of all!

Every trader down in Bays-ville, the tall and the small,
Would stand close together, with Bloomberg terminal bells ringing.
They'd stand hand-in-hand. And the traders would start singing!

They'd sing! And they'd sing!
And the more the Grinch thought of this Bay Street-Singing
The more the Grinch thought, "I must stop this whole thing!
Why, for fifty-three years, I've put up with it now!
I MUST stop this rally from coming!
…But HOW?"

Then he got an idea!
An awful idea!

"I know just what to do!" The Grinch laughed in his throat.
"I'll make a quick Canali suit and a top hat."

And he chuckled, and clucked, "What a great grinchy spell!
With this coat and this hat, I'll look just like J Powell!"
"All I need is another Fed head." The Grinch looked around.
But since Fed heads were scarce, there was none to be found.

Did that stop the old Grinch? No! The Grinch simply said,
"If I can't find a Fed head, I'll make one instead!"

So he took his friend Fox and some thread.
And placed a chauffeur hat atop his head.

THEN he loaded some briefcases and a bunch of banker boxes
On a ramshackle Benz and he whistled for old Fox.

Then the Grinch said, "Let's Go!"
And the Benz started down
Toward the offices where the traders avoided the last market meltdown.

All their windows were dark. Quiet snow filled the air.
All the traders were all dreaming of higher prices without care.
When he came to the first little building on the square.

"This is stop number one," the old Grinchy Powell hissed,
As he climbed to the roof, empty briefcase in his fist.

Then he slid down the stairwell, a rather tight pinch.
But if Seth could do it, then so could the Grinch.

He got stuck only once, for a minute or two.
Then he stuck his head out of the exit door for a clue.

There were vintage stock certificates hung all in a row.
"These certs," he grinned, "are the first things to go!"

Then he slithered and slunk, with a smile most unpleasant,
Around the whole office, ripping out network cables and co-workers presents!

Ethernet, audio, VGA, and power cords!
DVI, HDMI, USB, and display port-cords!

He jammed them in his briefcase, and with the ring of a bell,
Stuffed them all, one by one, up the stairwell.

Then he slunk to the kitchen. He took the traders' feast!
He took the traders' protein shakes! He took their roast beast!

He cleaned out that kitchen as quick as a flash.
Why, that Grinch even took their secret stash!

Then he stuffed all the food up the stairwell with glee.
"And NOW," grinned the Grinch, "I will stuff up the tree!"

And the Grinch grabbed the tree, as he started to shove,
When he heard a small sound like the coo of a dove.

He turned around fast, and he saw the overseas trader!
Jing Wu, who had been reading Elon Musk's latest Twitter.

The Grinch has been caught by this overseas trader
Who'd gotten up from her desk for a cold cup of water.

She stared at the Grinch and said, "Powell, why,
Why are you taking our Christmas tree? WHY?"

But, you know, that old Grinch was so smart and so slick,
He thought up a lie, and he thought it up quick!

"Why, my sweet little trader," the fake Powell lied,
"There's a light on this tree that won't light on one side.

So I'm taking it home to Washington, my dear.
I'll fix it up there. Then I'll bring it back here."

And his fib fooled the trader. Then he patted her head,
And he got her a drink and let her finish Musk's latest thread.
And when Jing Wu went back with her cup,
He crept to the stairwell and stuffed the tree up!

Then, the last thing he took
Was the New Year's Eve gala flyer!
Then he went up the stairwell, himself, the old lair.
On their walls, he left nothing but hooks and some wire.

And the only documents left in that Bay Street house
Were non-disclosure agreements for the partners' spouses.

He did the same thing
To the other Bay Street housesLeaving non-disclosures for the other partners' spouses!

It was quarter of dawn…
All the traders, still a-bed,
All the traders still a-snooze,
When he packed up his Benz,
Packed it up with their cables! Their hard drivers! Their drinking cup bottles!
Their phones! And their pens and notepads! And some exotic derivative models!

A hundred feet up, up the side of the CN Tower,
He rode with his load to the tiptop to dump it!

"Pooh-pooh to the traders!" he was Grinch-ish-ly humming.
"They're finding out now that no Santa Claus rally is coming!

They're just waking up! I know just what they'll do!
Their mouths will hang open for a minute or two.
Then the traders down in Bays-ville will all cry BOO-HOO!"

"That's a noise," grinned the Grinch,
"That I simply MUST hear!"
So he paused and put a hand to his ear.
And he did hear a sound rising over the snow.
It started in low. Then it started to grow…

But this sound wasn't sad!
Why, this sound sounded merry!
It couldn't be so!
But it WAS very MERRY!

He stared down at Bays-ville!
The Grinch popped his eyes!
Then he shook!
What he saw was a shocking surprise!

Every trader down in Bays-ville, the tall and the small,
Were singing without direct-market access at all!

He HADN'T stopped the Santa Claus rally from coming!
Somehow or other, it came just the same!

And the Grinch, with his Grinch-feet ice-cold in the snow,
Stood puzzling and puzzling, "How could it be so?

It came without Excel models! It came without extended flags!
It came without reversals, bottoms, or double zigzags!"

He puzzled for three hours till his puzzler was sore.
Then the Grinch thought of something he hadn't before!

"Maybe Christmas rallies," he thought, "don't come from the algo store.
"Maybe Christmas rallies…perhaps…means a little bit more!"

And what happened then…?
Well…in Bays-ville, they say
That the Grinch's cynical outlook turned that day!
And then, the minute his outlook was a little more true,
He whizzed with his load through the bright morning hew.

And he brought back the office equipment! And some food for a feast!
And he…
HE HIMSELF… The Grinch carved the roast beast!

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