A Return of Animal Spirits?

A Personal Note of Thanks

Before turning to our market analysis, we want to express our heartfelt gratitude to the many clients and friends who have reached out regarding our safety during the recent Los Angeles area wildfires. We’re happy to report that we have been able to perform all business functions without interruption.

We are deeply touched by your concern and care. While some of our team members have experienced property loss and several are still under evacuation orders, we are thankful to report that everyone on our team is safe and healthy. These challenging times have reminded us of the strong bonds we share with our clients and our community, and we are profoundly grateful for your thoughtful inquiries and support. Several of our clients and friends have also suffered losses, some of them their homes, and our hearts go out to them as well.

Reasons For A Return of Animal Spirits

Yesterday’s strong rally could have a few explanations or justifications -- an improvement in geopolitical prospects, the reporting of soft inflation numbers, good results from banks’ earnings reports. Could this rally presage some more lasting period of better market performance? We’ll examine a few relevant dynamics below.

As regular readers know, we’ve long emphasized the importance of global liquidity conditions as a key driver of market performance. As we begin 2025, the liquidity picture presents a nuanced but generally supportive backdrop, especially when combined with encouraging developments on both the geopolitical and earnings fronts. Together these could provide reasons for a return of “animal spirits” as the market continues to grapple with the uncertainty of the new administration’s concrete policy priorities.