It’s already Christmas

Edito Last night's evening delivered two Christmas gifts for the markets by lifting the two key political uncertainties of the past months: 1/ the victory and absolute majority obtained by the Conservatives open the door to the effective exit of the United Kingdom from the EU on 31 January next; 2/ the announcement of an imminent signature of Phase 1 of the Sino-American trade agreement means a tariff de-escalation. If uncertainties will persist in the medium term (what EU-UK agreement by the end of 2020? the details of the Phase 1 agreement? What about a Phase 2?), it all market-friendly in the short run. With central banks reaffirming their status quo, the news argues for a continuation of the risk-on movement for risky and cyclical assets, especially if the macro news flow continues to improve (our scenario). It will now be necessary to monitor the positioning of investors and be ready to implement hedges if optimism gets excessive.