The HCM-BuyLine® is positive and strong. There is more good news on the COVID-19 front as Moderna is very close to being approved for distribution, possibly as soon as Friday. If the Food and Drug Administration authorizes Moderna’s COVID-19 vaccine candidate, it will be the second vaccine to be made available to Americans during the coronavirus pandemic, and the first-ever authorized product for the 10-year-old biotech. 

The positive seasonals for December are likely only just starting. Since 1950, the seasonal surge in the December period typically starts on 12/15. Strong markets usually finish strong, so this would be consistent with our view that stocks could look good into the last few weeks of the year.

But, in this same period of time some headwinds have emerged:

• Fiscal relief package remains mired in Washington.
• Brexit risks loomed (last week).
• IPOs of Doordash + AirBnB were large increases in supply, and their initial surge raised alarms about excessive speculation.
• Tesla announced a large secondary supply.
• COVID-19 vaccines started rolling out in the US (sell on the news).
• More investors are suggesting stocks are topping, as they have moved so much faster than their fundamentals suggest. 

Industrial production increased 0.4% in November, double the consensus of 0.2%. It has increased in six of the past seven months, but is still 4.8% below its level in February, and is 5.5% lower than a year ago, underscoring the depth of the recession.

Manufacturing output, which accounts for about 3/4 of industrial production, rose 0.8% last month, led by a 5.3% jump in vehicle output. Excluding vehicles, manufacturing was up 0.4%, with notable gains in primary metals, computer and electronic products, aerospace and miscellaneous transportation equipment, as well as some nondurables such as food and paper products. Mining output increased 2.3%, while utilities output dropped 4.3%, as warmer-than-normal weather reduced the demand for heating. Core industrial production, which excludes vehicles, energy, and high-tech, rose 0.4%, led by business equipment. But similar to overall industrial production, it has yet to regain its pre-recession level and is still down 3.6% from a year ago.

The capacity utilization rate picked up 0.3 ppt to 73.3%, above the consensus of 73.0%. It has bounced back significantly from the record low in April, as factories reopened, but it remains below its pre-recession level, and is 6.5 ppt below its 1972-2019 average. This suggests there is plenty of production slack in the economy, which tends to put downward pressure on inflation.