In a week from today, the last FOMC meeting of the year will take place. As of today, there is a 92.3% probability of a 25 bps rate cut. The unemployment report was mixed last week and Inflation for November will be published tomorrow followed by the likely rate cut from the ECB this Thursday. With all that, what is the money doing? Money is going into U.S. equities and U.S. equities only. As you can see in the chart below, inflows since the elections have piled up to $140 Bn, but more significantly, everywhere else has experienced outflows. US exceptionalism is pushing stocks higher, despite the fact they’re not fully supported by earnings, and valuations are getting frothy. Investment outlooks are pointing towards the fact that U.S. equities are too rich, but very few are making the call to rotate out of U.S. into Europe or EM with conviction. Market calls will have to wait for the new year, it seems.
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