Dear Santa Claus, there are only a few weeks to go before your long-awaited arrival and I would like to make sure that you have received my letter. Looking at the stock market performance that has accumulated at the foot of the Christmas tree this year, your elves have had to work a lot and your hood will be heavy to wear. I do not know how you did it, but I am the happiest of the investors. Everything was like in my dreams ... For the first time in a very long time, there was economic growth everywhere, inflation has remained contained so far and the central bankers, who sometimes scolded us, did not even need to turn into bogey men. In short, you’ve spoiled us this year. Maybe you just missed a bitcoin at the bottom of our socks also !
Thank you Santa Claus for not having looked too much at our nonsense and those of the blond-haired politician who has heckled all year long in the back of the class. Hopefully, he decided to favour continuity by nominating Jerome Powell as the future new President of the Fed. More of the same could not have been a better choice to reassure markets. He also behaved nicely during his recent visit in Asia, avoiding triggering a geopolitical tsunami in its wake. In any case, I would be very grateful to you for not offering him anything to play war with his North Korean friend. Thank you also for the dovish ECB tapering announced last month as we were somewhat concerned about a potential nasty hawkish surprise. Super Mario has clearly remained our market’s favourite toy central banker this year.
We perfectly know that this goldilocks environment won’t last forever. At some point next year, inflation may start to rise (at least moderately), growth momentum will fade away and the big central banks will start gradually to withdraw the punch bowl. However, for the time being, we want to enjoy the end of the year season greetings. As a result we adopted again a more constructive views on our risk stance (upgraded one notch to mild preference), especially towards equities, in order to benefit from a very likely Santa Claus rally.
My colleagues and I obviously promise to behave well and try to be as wise as possible next year by limiting exposure to speculative debt (you warned us of the dangers with Toys ‘R’ Us) or to lend, eyes closed and without term premium compensation to the governments, to avoid financial repression on the cash that we would sometimes keep in deposit. Mom and Dad say you see everything we do from up there. So, we promise you to obey them, because we had all the gifts we wanted this year. Except perhaps bitcoins … But we do not hold it to you because like a lot of toys, it may soon be out of fashion. Now, I leave you because you must have a lot of work before Christmas night. Take good care of yourself and do not forget to say hello to Johnny Halliday : if he could continue to play all the music we love from up there, we should still be able to dance on the markets for the next few months.