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For much of November and early December (recall “Stocks are Overbought And Frothy” Warns Wall Street’s Most Accurate Analyst“), Morgan Stanley’s chief US equity strategist, Michael Wilson, repeatedly warned that stocks are poised for an (at least) 10% correction around year-end, before resuming their bullish trek higher (albeit under a different leadership as growth stocks are shunned in favor of value names). Well, the end of 2020 came and went and stocks pushed ever higher without a second thought, making a mockery of all predictions of imminent corrections.

So now that we are in the new 2021, has Wilson thrown in the towel on his imminent bearishness and has he joined the army of Wall Street strategists who see nothing but smooth sailing ahead?

Not at all: in fact, according to his first US Equity Strategy research note for 2021, the strategist warns that “extreme optimism and/or high valuations” has persisted, and while they are neither necessary nor sufficient conditions for a meaningful equity market correction, he must acknowledge “that the “risk reward” of the US equity market has deteriorated materially and the market is ripe for a drawdown.” As potential catalysts for said correction he lists the Georgia Senate seat run-off election, softer guidance than expected during 4Q earnings season, and some kind of intervention by regulators and/or the Fed to quash the exuberance in crypto-currencies, while “exhaustion and positioning will do the rest.” To wit:

Unlike humans, financial markets don’t have feelings. Instead, they look ahead and discount what humans often can’t see or even imagine. In fact, 2020 may go down as one of the best examples on record of such vision. In late February, markets quickly discounted the end of the cycle, with many stocks falling 50% or more in a month. Then, just as quickly, markets began to discount what would be the fastest recovery on record. The “risk/reward” of investing is always greatest when fear is highest because valuation is cheapest. 2020 was textbook in that regard with March offering a generational opportunity to buy stocks.

The setup couldn’t be more different today. Optimism is high because the recovery is now visible to all and prices have appropriated adjusted. The only fear now is about missing out.

And while Wilson concedes that “extreme optimism and/or high valuations are necessary but insufficient conditions for a meaningful equity market correction” he acknowledges “that the “risk reward” of the US equity market has deteriorated materially and the market is ripe for a drawdown. Potential catalysts could include the Georgia Senate seat run-off election, softer guidance than expected during 4Q earnings season, and some kind of intervention by regulators and/or the Fed to quash the exuberance in crypto-currencies. Exhaustion and positioning will do the rest.”

But wait, there’s more.

Reminding clients that one year ago he suggested that a recession was likely to arrive in the next 12 months because the end-of-cycle conditions were vulnerable to a shock, the actual outcome – and one which Morgan Stanley did not expect – was a global pandemic which served as the shock in question, “but the public health nature of it almost ensured a more aggressive transition to fiscal policy than even what we had been expecting.“

Taking this a step further, Wilson writes that “one could argue we have officially moved into what was first described by Nobel winning economist Milton Friedman in 1969 and subsequently by former Federal Reserve Chair Ben Bernanke in 2002 as “helicopter money.”

In short, as the MS strategist describes it, the new regime is defined by the Fed using its balance sheet to print money and send it directly to consumers and companies who will spend it in the real economy. This is very different than the Quantitative Easing programs used after the financial crisis, which simply shored up damaged consumer and bank balance sheets.

In other words, the money-printing then was simply filling a hole left by the crisis. This time around, money is creating newfound spending that has led to the fastest economic recovery on record (Exhibit 2).

Taking this another step further, the results of the recent election and the announcement that Janet Yellen will be appointed as Treasury Secretary suggest that we are likely to see more political support for Modern Monetary Theory (MMT) policies and specific programs like Universal Basic Income (UBI). Furthermore, Wilson believes that “the public may demand a QE for the people this time.”

Ominously, what this means to the bank which recently surpassed Goldman in total trading revenues “is that the Fed may no longer be in control of the velocity of money and that is exactly the kind of sea change that can lead to unexpected outcomes in the financial markets.“

Of course, so far we have only seen the benefits from this nascent explosion in helicopter money, with a surge in asset prices tied to accelerating economic growth (i.e. stocks), especially cyclically oriented equities

Yet while almost all stocks have done well since the market lows in March, ‘new leadership is emerging’ according to Wilson. This is natural after a recession, particularly one that was triggered by a health crisis and led to a generational shift from monetary to fiscal policy dominance.

These new areas of leadership line up with what we have been recommending and allocating to since March—small caps, consumer discretionary, materials, financials, cyclical tech like semiconductors and hardware and industrial stocks.

Yet while all of the above may explain how we ended up here, what does it mean for the future? Looking ahead, the question for investors should center around the unexpected consequences of this policy change and what it could mean for asset prices going forward, according to Morgan Stanley.

Wilson writes that in his view, “the big surprise of 2021 could be higher inflation than many, including the Fed, expect.” And while he notes that currently the consensus is expecting a gradual and orderly increase in prices as the economy continues to recover, the move in asset prices like Bitcoin suggest markets are starting to think this adjustment may not be so gradual or orderly.

Needless to say, Wilson agrees with this troubling outlook, and explains that “with global GDP output already back to pre-pandemic levels and the economy not yet even close to fully reopened, the risk for more acute price spikes is greater than appreciated.” He then cautions that that risk is likely to be in areas of the economy where supply may have been destroyed and ill-prepared for what could be a surge in demand later this year—e.g. restaurants, travel and other consumer/business related services. As such, while the best inflation hedges are stocks and commodities in the intermediate term, “inflation can be kryptonite for longer duration bonds” – and stocks – “which would have a short term negative impact on valuations for all stocks should that adjustment happen abruptly.”

Finally, as Wilson peruses the financial markets today, he can’t help but notice one major outlier to the constructive economic story line that has now been adopted by most investors: long-term bonds/interest rates: “No other asset in the world is as mispriced for even the modest increase in growth/inflation that is expected. Based on some simple relationships with stocks, commodities and economic growth projections, the 10-year US Treasury yield appears to be at least 100 basis points, or 1%, too low.”

According to Wilson, this should be the most crucial consideration for investors because every asset in the world is dependent on the 10-year US Treasury yield. It is the pricing mechanism for all long-duration financial and real assets—equities, credit, real estate and commodities. In other words, while better economic growth positively affects the value of these assets, low long-term Treasury yields play just as big of a role, if not bigger.

Quantifying the impact of such a move, and using the S&P 500 Index as an example, Wilson writes that an increase of 1% in the 10-year US Treasury yield from current levels would lead to an 18% decrease in the price/earnings multiple (P/E), all else equal. For the Nasdaq 100 Index, such a rise would equate to a 22.5% decline in the P/E according to the MS strategist who writes that “while such an abrupt increase in interest rates is unlikely, we wouldn’t rule it out.”

The point here is that asset prices are looking rich at the moment given the upside risk to interest rates and very low chance they fall further in the absence of some bad economic developments.

As Wilson concludes, “while there is still very good potential upside for many of the stocks we like in this new bull market, one should be prepared for an adjustment in valuations lower as  interest rates catch up to what other asset markets have been saying for months. If this adjustment is gradual, then stocks and other assets will likely go sideways for a while until earnings eventually take them higher. However, should that adjustment in rates occur more rapidly, all stock prices will adjust lower, perhaps sharply, rather than just go sideways. We suspect such an adjustment is more likely than most if we are right about growth and inflation surprising further on the upside.“

To this we would add just one caveat: if stocks indeed plunge, all of the freshly released money will go back into – where else – Treasurys, which will promptly send yields much lower, which will ease any fears of a sharp and violent repricing higher in yields, and so on. In short: while the bearish case is one of a sudden jerk higher in yields and lower in stocks, the reality is that such a move would not be linear but would take place in a staggered staccato as investors bounce from stocks to bonds and back again.

Finally, don’t forget the Fed which will immediately implement its plunge protection powers should yields truly surge and force stocks to crash. In fact, some would welcome such a development as an outsized risk asset crash would merely force the Fed to cross the final Rubicon and after it started buying corporate bonds last March, Powell (and Yellen) would finally join the BOJ and SNB in openly “monetizing” stocks in the open market.

In less than three years, a joint health-care venture designed by “the smartest men in the room” – that being the CEOs of Amazon, Berkshire Hathaway, and JPMorgan Chase – that was supposed to disrupt how companies pay for employee care has apparently itself been terminally disrupted.

CNBC has learned exclusively that Haven, which was heralded as the miracle cure for healthcare as a means to lower health care costs for employees, has informed employees Monday that it will shutter operations by the end of next month. 

“Many of the Boston-based firm’s 57 workers are expected to be placed at Amazon, Berkshire Hathaway or JPMorgan Chase as the firms each individually push forward in their efforts, and the three companies are still expected to collaborate informally on healthcare projects,” sources told CNBC. 

Brooke Thurston, a spokeswoman for Haven, confirmed to CNBC of the company’s plan to disband. 

“The Haven team made good progress exploring a wide range of healthcare solutions, as well as piloting new ways to make primary care easier to access, insurance benefits simpler to understand and easier to use, and prescription drugs more affordable,” Thurston said in an email.

“Moving forward, Amazon, Berkshire Hathaway, and JPMorgan Chase & Co. will leverage these insights and continue to collaborate informally to design programs tailored to address the specific needs of our individual employee populations and locations,” she said.

This is a developing story…

Authored by Jonathan Turley,

Below is my column in the Hill on the rise of delusional politics in America – a problem captured vividly on New Year’s Eve as Mayor Bill de Blasio dancing with his wife to a virtually empty Times Square.

This is not Chicago where Sinatra sang about seeing a “guy dancing with his wife.” It is New York and the only one dancing seemed to be de Blasio.

We are watching as both parties seem blissfully and utterly detached from reality. Here is the column:

At midnight at the start of the new year, if you listened hard, you could almost hear the teeth of an entire nation grinding, or at least of those watching coverage from New York as Mayor Bill de Blasio danced in a nearly empty Times Square. Millions watched as he dipped his wife in a romantic flourish to Frank Sinatra singing “New York, New York.” At least Nero made his own music.

The scene drew angry rebukes. Andy Cohen said it made him feel sick.

“I did not need to see that at the start of 2021. Do something with this city! Honestly, get it together!”

In fairness to de Blasio, it probably seemed harmless. Who would object to a guy dancing with his wife? But sometimes a predictable photo turns into a cursed image. Just ask 1988 presidential candidate Michael Dukakis after he took a spin in an army tank. The image captured what many considered as his faux commitment to a strong defense. He and his campaign failed to think of how driving around looking like Mickey Mouse on a battle tank would only drive home the criticism of his defense policies.

For de Blasio, dancing in a nearly empty Times Square came across not as amorous but as delirious in a city in lockdown with a collapsing economy and soaring crime rates.

For many, it reinforced the crisis both parties now face.

We have become a nation that seems untethered from all reality. In one of the most liberal cities on earth, de Blasio cannot break 40 percent in popularity. But he, like many others, plays to the extreme wings of his party. As crime raged, he pushed to reduce the police budget by $1 billion and eliminated the plain clothes division. New York has had a 50 increase in homicides and almost a 100 percent increase in shootings.

He also closed public schools despite overwhelming scientific evidence of little risk for coronavirus exposure, notably for elementary students. He finally caved to the pressure from parents and experts, admitting there was little risk in having the schools reopen. He supported the closing of restaurants, sending many to insolvency, despite the fact that they contribute to less than 2 percent of confirmed infections.

With New York losing money, de Blasio said the federal government could bail out City Hall and local businesses by simply printing more money, a statement both fiscally and politically delusional. As many highly taxed residents continue to move out of New York, de Blasio voices his “tax the hell out of the wealthy” policy. He recently declared that the purpose of public schools is the redistribution of income.

The eerie image of de Blasio dancing in a dead Times Square captures what could await us in 2021. Even if the pandemic is curtailed with the vaccines, cities like New York have been devastated by the lockdowns. There is no way that the federal government can bail out every business and landlord in one city, let alone the entire country.

At the same time, last year ended much as it had gone on for months. In Portland and Philadelphia, federal buildings were attacked by rioters and looters. In Washington, both parties deadlocked and, regardless of what happens in the Georgia Senate runoffs, that division will likely continue. Joe Biden and others have called for massive new spending in a country with $27 trillion in debt. Yet our lawmakers in Washington continue a kind of ghostly dance, oblivious to the costs and hazards ahead.

Meanwhile, reporters are unlikely to return to the standards of objectivity and independence after years of open bias against Donald Trump. Some journalism professors now reject the very concept of objectivity in favor of open advocacy. Columbia University journalism dean Steve Coll has denounced what he says is freedom of speech protected by the First Amendment now being “weaponized” to protect disinformation. Many reporters are invested in the next administration, including downplaying or ignoring those scandalous allegations against Hunter Biden and Eric Swalwell. Networks actively tailor their coverage to offer their viewers “safe spaces” without opposing facts or stories.

It is not just politicians and the press who have not changed. The reason 2021 will not be much different than 2020 is because we as a nation have not changed. We are still divided right down the middle, and the space between is filled with blind rage. Democrats have called for blacklists, disbarments, and other actions against those “complicit” in the Trump years, while over 70 percent of Republicans believe the presidential election was rigged and that Biden did not lawfully win.

Many among us sadly do not want any of this to change. Rage seems to be addictive. It becomes a license to hate. While few will admit it, the Trump years were a release from decency and civility. We have become a nation of conflict junkies. Even worse, we all live in artificial spaces which are a dangerous delusion because we face this economic crisis, international conflicts, and rising violence in our cities. That is why de Blasio dancing in New York could prove the ultimate embodiment not of 2020 but of 2021. Unless the middle can come out stronger, we all will be dancing with de Blasio in a dead space where the country once thrived.

Having correctly called for a surge in investor enthusiasm in 2020, accompanied by a disappointing economy in 2020 (along with a  UK win in the Brexit debacle), Byron Wien, Vice Chairman together with Joe Zidle, Chief Investment Strategist in the Private Wealth Solutions group at Blackstone, today issued their list of the Ten Surprises of 2021.

This is the 36th year Byron has given his views on a number of economic, financial market and political surprises for the coming year. Byron defines a “surprise” as an event that the average investor would only assign a one out of three chance of taking place but which Byron believes is “probable,” having a better than 50% likelihood of happening. Byron started the tradition in 1986 when he was the Chief U.S. Investment Strategist at Morgan Stanley. Byron joined Blackstone in September 2009 as a senior advisor to both the firm and its clients in analyzing economic, political, market and social trends. In 2018, Joe Zidle joined Byron Wien in the development of the Ten Surprises.

Byron and Joe’s Ten Surprises of 2021 are as follows:

1. Former President Trump starts his own television network and also plans his 2024 campaign. His lead program is The Chief, in which he weekly interviews heads of state and CEOs with management styles like his own. His virtual interview with Vladimir Putin draws more viewers than any television program in history.

2. Despite the hostile rhetoric from both sides during the U.S. presidential campaign, President Biden begins to restore a constructive diplomatic and trade relationship with China. China A shares lead emerging markets higher.

3. The success of between five and ten vaccines, together with an improvement in therapeutics, allows the U.S. to return to some form of “normal” by Memorial Day 2021. People are generally required to show proof of vaccination before boarding airplanes and attending theaters, movies, sporting events and other large gatherings. The Summer Olympics, postponed last year, are held in July with spectators allowed to physically attend.

4. The Justice Department softens its case against Google and Facebook, persuaded by the argument that the consumer actually benefits from the services provided by these companies. Certain divestitures are proposed and surveillance restrictions are applied, but the broad effort to break them up loses support, except in Europe.

5. The economy develops momentum on its own because of pent-up demand, and depressed hospitality and airline stocks become strong performers. Fiscal and monetary policy remain historically accommodative. Nominal economic growth for the full year exceeds 6% and the unemployment rate falls to 5%. We begin the longest economic cycle in history, surpassing the cycle that lasted from 2010 to 2020.

6. The Federal Reserve and the Treasury openly embrace Modern Monetary Theory as their accommodative policies continue. As long as growth exceeds the rate of inflation, deficits don’t seem to matter. Because inflation increases modestly, gold rallies and cryptocurrencies gain more respect during the year.

7. Even as energy company executives cut estimates for long-term growth, near-term opportunities are increasing. The return to “normal” increases both industrial activity and mobility, and the price of West Texas Intermediate oil rises to $65/bbl. Rig counts increase and energy high yield bonds rally soundly. Energy stocks are among the best performers in 2021.

8. The equity market broadens out. Stocks beyond health care and technology participate in the rise in prices. “Risk on” is not without risk and the market corrects almost 20% in the first half, but the S&P 500 trades at 4,500 later in the year. Cyclicals lead defensives, small caps beat large caps and the “K” shaped equity market recovery unwinds. Big cap tech is the source of liquidity, and the stocks are laggards for the year.

9. The surge in economic growth causes the 10-year Treasury yield to rise to 2%. The yield curve steepens, but a concomitant increase in inflation keeps real rates near zero. The Fed wants the strength in housing and autos to continue. As a result, it extends the duration of bond purchases in order to prevent higher rates at the long end of the curve from choking off credit to consumers and businesses.

10. The slide in the dollar turns around. The post-vaccine strength of the U.S. economy and financial markets attracts investors disenchanted with the rising debt and slower growth of Europe and Japan. Treasurys maintain a positive yield and the carry trade continues.

“Also Rans”

Every year there are always a few Surprises that do not make the Ten, because we either do not think they are as relevant as those on the basic list or we are not comfortable with the idea that they are “probable.”

11. Cyber-attacks, mostly from Eastern Europe and the Middle East, begin to have an economic impact. Bank account information is invaded and distorted, patient records are lost at hospitals and credit collection companies can’t keep track of customer purchases. Those tampering prove to be more skillful than those protecting the integrity of the data and the dislocation cost becomes significant.

12. Tesla acquires a major global auto manufacturer in a transaction that involves a combination of cash and stock. Elon Musk is the CEO and pledges to eliminate the internal combustion engine by the end of the decade.

13. Kim Jong-un threatens to explode his latest long-range missile, capable, he says, of reaching Los Angeles. Trump invites him onto TV and explains that Kim will be a better person and the world will be a better place if he works with other countries rather than threatening them. Kim agrees to stop testing long-range missiles. Trump looks into the camera and says, “People say I am the best negotiator.”

Trade accordingly…

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The House of Representatives and the Senate on Sunday adopted rules that outline how the counting of Electoral College votes will take place on Jan. 6.

The rules were passed without recorded votes. Instead, a voice vote was used in both chambers.

The guidance, introduced by Senate Majority Leader Mitch McConnell (R-Ky.), says the chambers will meet in a joint session on Jan. 6 presided over by Vice President Mike Pence.

Pence, as president of the Senate, will open “all the certificates and papers purporting to be certificates of the electoral votes,” the rules state, a nod to how seven states sent so-called competing electors, or certificates for both Democratic presidential nominee Joe Biden and President Donald Trump, to Washington.

The certificates and papers will be opened, presented, and acted upon in alphabetical order, starting with Alabama.

This is when dozens of Republicans—50 representatives and 12 senators, according to an Epoch Times tally—are planning to object to some certificates, alleging election irregularities including voter fraud and failure to follow state election laws.

That will trigger a withdrawal from the joint session and a two-hour debate, followed by votes in each chamber. Only with a majority vote from both the House and the Senate would a challenge be upheld, which even supporters find unlikely, considering Democrats who control the House and Senate Republican leadership, including McConnell, have expressed disapproval with the plan to object.

House Speaker Nancy Pelosi (D-Calif.) in a letter to colleagues on Sunday noted that objections can happen but said, at the end of the day, Biden “will be officially declared the next president.”

“On Monday, we will have a clearer picture of how many state votes will be subject to an objection. Our choice is not to use the forum to debate the presidency of Donald Trump,” she added.

Reps. Ron Estes (R-Kan.), Tracey Mann (R-Kan.), and Jacob LaTurner (R-Kan.) said Sunday they will join in the objections, saying in a statement that several states are “facing serious allegations of voter fraud and violations of their own state law.”

“This action is not taken lightly and comes after extensive study and research. Kansans deserve to know that all legal, and only legal, votes were counted. We hope our actions begin to restore the confidence of tens of millions of our fellow Americans that feel their sacred right to vote is under attack,” they added.

Reps. Jim Jordan (R-Ohio) and Richard Hudson (R-N.C.) also announced Sunday they’ll object.

But seven Republican representatives, including several strong Trump supporters, said they will not join in the effort, and denounced the move.

“Of the six states as to which questions have been raised, five have legislatures that are controlled by Republicans, and they all have the power to send a new slate of electoral votes to Congress if they deem such action appropriate under state law. Unless that happens between now and Jan. 6, 2021, Congress will have no authority to influence the outcome of the 2020 presidential election,” the group wrote in a statement.

“To take action otherwise—that is, to unconstitutionally insert Congress into the center of the presidential election process—would amount to stealing power from the people and the states. It would, in effect, replace the Electoral College with Congress, and in so doing strengthen the efforts of those on the left who are determined to eliminate it or render it irrelevant.”

The weekend saw a flurry of action, with 11 senators following Sen. Josh Hawley (R-Mo.) in announcing they’d join in the objections unless Congress appoints a commission to examine alleged election irregularities. The idea is modeled on the panel formed in 1877 amid a contested election.

Hawley’s Dec. 30 announcement triggered a number of House members to announce their intention to object. The number planning to do so has more than doubled since then.

A segment of Republicans are focusing on Pence’s role in the proceedings. They sued the vice president and asked a court to rule he has the “exclusive authority” to decide between dueling electors.

A judge dismissed the case and an appeals court rejected an appeal.

Pence had asked the court to dismiss the suit but said through a spokesman on Saturday that he supports efforts to challenge electoral votes.

“Vice President Pence shares the concerns of millions of Americans about voter fraud and irregularities in the last election,” Pence’s chief of staff, Marc Short, said in the statement sent to media outlets.

President Trump on Monday suggested that the election results can’t be certified due to “verifiably WRONG” numbers, and teased the release of “the real numbers” during a speech in Dalton, Georgia set for 8:30p.m. eastern time tonight.

How can you certify an election when the numbers being certified are verifiably WRONG. You will see the real numbers tonight during my speech, but especially on JANUARY 6th. @SenTomCotton Republicans have pluses & minuses, but one thing is sure, THEY NEVER FORGET!

— Donald J. Trump (@realDonaldTrump) January 4, 2021

Trump’s Monday night rally is intended to boost Republican Sens. Kelly Loeffler and David Perdue, however it’s clear that he’ll focus on his ongoing challenges to the 2020 election, which has the support of at least 140 House Republicans and nearly a dozen GOP Senators led by Sen. Ted Cruz of Texas.

“We’ve seen in the last few months, unprecedented amounts of Voter Fraud.” @SenTedCruz True!

— Donald J. Trump (@realDonaldTrump) January 4, 2021

In a contentious phone call secretly recorded by Georgia Secretary of State Ben Raffensperger and leaked to the Washington Post, Trump warns the Republican official that “The people of Georgia are angry, and these numbers are going to be repeated on Monday night, along with others that we’re going to have by that time, which are much more substantial.“

Later Monday morning, Trump attacked the “Surrender Caucus” of Republicans who want to accept the results of the election and move on with life under a Biden administration.

The “Surrender Caucus” within the Republican Party will go down in infamy as weak and ineffective “guardians” of our Nation, who were willing to accept the certification of fraudulent presidential numbers!

— Donald J. Trump (@realDonaldTrump) January 4, 2021

By Bloomberg commentator Jan-Patrick Barnert

The year that everyone is pinning their hopes on is finally here. After a late 2020 rally, however, market signals are mixed about the potential for stocks to climb the next leg higher. Here’s a quick look at where we are and what to watch for in the coming weeks.

Europe’s stocks ended 2020 with a year-end rally as the Brexit trade deal finally made it across the finish line. It wasn’t enough for the Stoxx 600 to erase its annual losses, however, and the momentum has cooled down considerably. Many argue that a lot of good news is now priced in, at least in the short term.

Looking at Euro Stoxx 50 futures, the picture is rather neutral. While the latest support held and there are no clear sell signals yet, there are also no convincing signs pointing to another leg higher.

The first quarter isn’t short of risk events that could determine the initial market direction. This week’s U.S. Senate run-off election is the first stop, with Jefferies strategists calling it “the obvious risk.”

Later this month, the ECB and the Federal Reserve hold meetings, with fourth-quarter GDP figures following in February. Over in Asia, the China National People’s Congress will start in early March.

Volatility has stayed elevated, indicating some caution still lingers. The VIX Index, while at lower levels than during the sharp selloff in early 2020, has stayed above the 20-point mark for 218 days now. That’s only the fourth time since 1990 that the gauge has remained above that threshold for more than 200 days. The VStoxx Index of euro-area volatility has also held above 20 since late February.

The November rotation that sparked optimism about a long-awaited revival in the value trade got a reality check just a month later as growth stocks took over again. While a sustained switch may be key for Europe to outperform, a key value sector — banks — face hurdles ahead. The fine print of the Brexit may affect London’s financial industry, while the dividend debate is far from over.

Sentiment wise, there’s room for a catch up as markets have rallied harder than a euro-area measure of confidence. Other indicators like the CNN Fear & Greed index have recently retreated from very bullish levels, indicating that while stocks are higher, there may not be too much exuberance in the wider market.

Additionally, the high level of cash still on the sidelines might limit the downside in any short-term setbacks.

Things look smooth on the data front so far, although stricter lockdowns toward the end of the year in some countries may mar the short-term picture. With the consensus treating 2021 as the year of economic recovery, macro data will need to deliver on high expectations.

Exaggerated by equity weakness, oil prices have plunged from hope-filled overnight exuberance as OPEC+ meets (virtually) and Russia proposes a 500k b/d output hike for February.

WTI tested up near $50 overnight before plunging back below $47.50 on the Russia headlines…

Bloomberg reports that the opening remarks from Prince Abdulaziz Bin Salman suggest very strongly that Saudi Arabia will oppose any increase in production in February. That could make for another very fraught meeting, if Alexander Novak decides to dig his heels in over the Russian proposal for an increase.

However, as OilPrice’s Irina Slav notes, OPEC has signaled it is concerned about oil demand despite its production control efforts as Covid-19 cases continue to surge in key markets, and the global total is still on the rise.

It seems vaccine optimism has begun to wear off, too, as it has become clear mass vaccinations will take months rather than weeks, so demand will be subdued for longer than some optimists in the trading community may have hoped.

“The outlook for the first half of 2021 is very mixed,” OPEC Secretary-General Mohammad Barkindo said on Sunday, ahead of an OPEC+ meeting later today. “There are still many downside risks to juggle,” Bloomberg quoted the official as saying.

In December, the extended cartel agreed to Russia’s proposal to start adding 500,000 bpd to their daily total from January based on the improved demand outlook and some members’ unwillingness to continue cutting deep. Yet this may change at today’s meeting. Russian Deputy Prime Minister and OPEC coordinator Alexander Novak suggested at the end of last year that the new deal could be tweaked if demand were to recover faster than previously expected.

While this looks unlikely at the moment, prices have improved, which would lend weight to Russia’s support for another 500,000 bpd increase in production in February. It was in its original proposal, which covered the period from January to April, but OPEC+ also agreed in December to meet every month to keep its hand on the pulse of the oil market, which basically means surprises are always possible whatever the original plans were.

According to the Bloomberg report from the preliminary meeting of OPEC yesterday, oil consumption was about to “shift from reverse to forward gear,” soon, thanks to vaccines, Barkindo said.