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Situational awareness: Chinese and European services data came in better than expected. Investors will now look to the U.S. ISM nonmanufacturing report later this morning.
"I'm not a businessman; I'm a business, man." - See who said it and why it matters at the bottom.
Illustration: Aïda Amer/Axios
The No.1 risk to the stock market continuing its strong performance next year is not President Trump or weak U.S. economic data or even China, senior analysts at John Hancock Investment Management say. It's whether or not the Fed continues to stimulate the economy through what they call "not QE."
What it means: Fed chair Jerome Powell has insisted the central bank's bond buying program — initiated after rates in the systemically important repo market spiked to five times their normal level in September — is not quantitative easing.
The intrigue: The new "not QE" program was "like a fourth rate cut this year," John Hancock co-chief investment strategist Matthew Miskin said during a media briefing Tuesday in New York. And it has given a boost to the stock market.
The big picture: "The equity market has benefited from a super aggressive Fed," Ethan Harris, head of global economics at Bank of America Merrill Lynch, told Axios during a separate event Tuesday at BAML headquarters.
The converse is also true, Miskin argued.
The bottom line: Miskin and John Hancock co-chief investment strategist Emily Roland expect the Fed will continue to pump money into the market, pushing its balance sheet above the record $4.5 trillion it reached before it began unwinding in 2017. That will help buoy the stock market for further gains of 5%–10% next year.
The Fed's balance sheet of U.S. government bonds and mortgage-backed securities expanded from $870 billion in August 2007 to $4.5 trillion in early 2015. The central bank then began cutting back on bond buying in a "normalization" process that began October 2017 and ended in August 2019, taking the balance sheet as low as $3.8 trillion.
The big picture: Powell has said that the program is not QE or economic stimulus, but "the Fed is going to have to change their tune," Miskin told Axios.
Investors had largely priced out more than one rate cut from the Fed in 2020, but Trump's comments Tuesday that he would prefer to wait until after the 2020 election to make a deal with China prompted investors to rethink those bets.
Consulting firm McKinsey recommended ICE cut spending on food for migrants and on medical care and supervision of detainees, plus looked to accelerate the deportation process at border facilities. (N.Y. Times)
Food-delivery startup Postmates has laid off dozens of employees and told those in Mexico City that it will close its office there. (CNBC)
Peloton shares fell by as much as 10% during trading on Tuesday, the most in about two months, as backlash mounted over the company's recent ad. (Bloomberg)
Saudi Aramco has received nearly 6 billion orders from institutional buyers, according to the lead bankers on the oil company's IPO. (Reuters)
The House of Representatives overwhelmingly approved legislation to impose sanctions on Chinese officials for human rights abuses against Muslim minorities in the country. (Bloomberg)
The market responded positively in after-hours trading to the announcement that Sundar Pichai will take over as CEO of Alphabet in addition to his current role as head of the core Google unit.
Between the lines: Page and Brin, who started Google in 1998, have been increasingly invisible in recent years, not even appearing at key Google events.
Americans living in Southern states will have the hardest time getting out of credit card debt, according to a CreditCards.com report that compares credit card debts and household incomes.
Breakdown: A typical consumer from New Mexico carries $8,356 in credit card debt (23rd highest in the U.S.) but earns a median income of $47,169, which is the fourth lowest in the nation.
The combination of increased appetite for passive investment and financial regulations, particularly Europe's Mifid II, is underpinning a "profound reshaping" of what Wall Street research analysts do, Financial Times' Robin Wigglesworth writes.
What's happening: Because Mifid II mandates that asset managers and institutions pay for research directly rather than simply paying banks or researchers for their services broadly, there's a great "unbundling" happening throughout asset management.
The intrigue: "Nowadays, analysts sift through non-traditional information such as satellite imagery and credit card data, or use artificial intelligence techniques such as machine learning and natural language processing to glean fresh insights from traditional sources such as economic data and earnings-call transcripts," per FT.
The bottom line: "For now, verbose reports remain the bread and butter of an investment bank analyst. But the form of the content is evolving," Wigglesworth writes.
Happy 50th birthday to Shawn Corey Carter, aka Jay Z, aka Young Hova, aka Hov, aka President Carter, aka Jigga.