The Treasury Department Stirs the Rally

We must keep watching the Treasury Department's spending habits in the months ahead - as it continues to defy gravity and the reality of U.S. debt levels.

Action to Take: Slow clap for BOJ Governor Ueda, who managed to raise rates without breaking markets this time around.

Now we know what happened to December's Santa Rally - while Americans were finally getting wise to inflation, the money printer was moved to Tokyo. It is no surprise that Treasury yields had jumped into year-end. The Japanese weren’t footing the bill. Now, with the VIX at 15 and bond volatility approaching yearly lows, markets can finally take a breath. Next week's Fed meeting appears quiet, offering our first shot at sustained upside - barring any tariff surprises from Trump.

We’ll need to watch the Treasury's moves closely. Their drawdown of the Treasury General Account to avoid the debt ceiling could pump temporary liquidity into markets. While this might fuel gains soon, that capital needs to come back out before it stokes inflation - right as Trump's spending plans take shape.

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Momentum: Positive Across the Board