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Weekly Memorandum 12/14/2020

Stocks are up slightly to start the week, as the Electoral College is set to cast their vote today. The question now is how an actual transition of power would look like, as claims of election fraud run rampant through millions of Americans. The good news is that multiple economic indicators suggest a continued rebound and growth in 2021, so perhaps the market knows something the public does not.

Interest rates are slightly lower this morning, as bond prices have managed to cut their losses in recent sessions. However, we note the dollar continues to display weakness, as prices fell to another multi-year low this morning. This continues to be a major headwind for interest rates, because a falling dollar is inflationary by nature. Many commodities continue to trade near multi-year highs, which is indicative of a "reflationary" wave taking place in the market.

Gold and silver were slightly down last week, as these metals continue to digest their gains from the past couple years. The 'Big 3' cryptocurrencies (Bitcoin, Ethereum, Litecoin) were all down last week, but had recovered most of their losses by the end of the week.

We are in one of the most bullish times of the year from a seasonal perspective. If the market continues to rally through the holidays, we need to be keen on the possible formation of an important high sometime in the next month or so.

A new Mercator Letter will be published this Sunday, December 20. It will be the last publication of 2020 for this report. Annual subscriptions continue to be on sale with coupon code 'MERCATOR' for the remainder of December.

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