The election drama is over. Last Wednesday's (November 7, 2018) post-election rally was more of a relief rally than an enthusiasm rally as short sellers needed to do some serious buying to close out their positions.
The market is now counting on inaction from a divided Congress for two years. Maybe not the best solution for the country, but Wall Street likes predictability. Very unlikely that anything game-changing is passed until after the 2020 election.
The market positive: the economy is still rolling with great economic data and solid earnings reports over the last couple weeks. Very hard to see a recession in the next year as long as the Fed doesn't get carried away. We desperately need a little wage inflation in the lower 1/2 of the wage scale. Rising wages and the second year of personal tax cuts should bode well for consumer spending in 2019.
The Market Negative: With Trump facing a contentious House, China has little motivation to cave on tariffs. Look for tariff talk to be the market topic of 2019. Global growth is still too tepid. Dollar strength will likely continue to put pressure on emerging market economies.
Overall things are looking good for a Santa rally to end the year.
We are still being cautious and watching our signals that will dictate our course of action.