Utilities have made a strong comeback over the past couple weeks in one of the strongest short-term risk-off signals in the entire market. Healthcare is having its biggest breakout in at least a year and it makes a lot of sense. Even though Fed expectations have tempered somewhat, there's still the potential for more bond market volatility over the next quarter or two.

The small-cap rally, especially relative to the S&P 500, has been impressive, but the one thing I’d feared here looks like it might be happening - getting rejected at its 52-week highs. Despite getting stretched thin, the long bond rally isn’t necessarily done yet, but it needs conditions to match up with expectations to hold on to these levels. Interesting to see that defensive equities staged a minor comeback to close out the year, a time when low volatility generally favors riskier strategies.

The retail sales numbers for November and early holiday sales figures should shore up confidence in the near-term. The breakout to new multi-year highs for small-caps has officially happened, which means that this run could have longer legs and strength than prior more narrow rallies. Long bonds have obviously made significant gains, but even ultra-short Treasury bills are starting to see their yields drop in anticipation of rate cuts in the first half of 2024.