And Now, For Something Completely Different!

(With apologies to the Monty Python folks) 

I will let those who consider themselves expert in the field to determine how effective the U.S. - China Phase 1 trade deal will be, although I might be so bold as to suggest that it was likely done more to placate stock market participants than creating anything of significant substance. Ultimately, time will decide. As for Brexit, again, I suspect that the headline election results take away some uncertainty, but the ultimate impact on the U.K. economy and the implications for another Scottish referendum are still going to hang over the U.k.'s economic outlook.

In the meantime (for something completely different), lets look at some of the things that are going on behind the scenes that few are paying much attention too.

While stocks are making new highs, the global economy continues to struggle (and there is no immediate relief coming from the U.S. - China deal and / or the U.K. election):

The U.S. consumer provides about 2/3 of the economic growth for that particular country and with both the manufacturing and service economies struggling, has been supporting all the recent growth. Today's retail sales data for November fell short of expectations:

And despite President Trumps emphatic claims of the best economy ever, it would appear that there is little now supporting GDP growth moving into 2020.

While he also likes to tout the refrain "Jobs, Jobs, Jobs"... Average employment growth (pink line) has been actually trending lower:

And the number of Americans filing for unemployment benefits unexpectedly increased by 49,000 to 252,000 in the week ending December 7. The highest number since 2017 (it does appear that these numbers are starting to go the other way):

And finally, way in the background... what drove stocks higher through 2014, was Quantitative Easing, which grew the U.S. monetary base and heaped liquidity on the financial system. Since late 2015, the U.S. Federal reserve has been drawing liquidity out of the financial system (tightening monetary policy and raising interest rates). While there have been three rate cuts in 2019, the monetary base has barely grown and the divergence between the S&P 500 and the monetary base has continued to widen significantly.

With all of the good news built in to stock prices, it remains to be seen what the not so good news might do when it actually starts to matter. Stay tuned.