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Last week, the S&P 500 was unable to hold onto the gains created during Friday’s trading session. Many perceived the slight selloff as trading fatigue caused by the three-week rally. Others stated caution of the Italian constitution referendum that was voted on Sunday. Although this “no” vote is not on par with Britain leaving the EU, it signals that the country could be following that same trajectory.

As previously noted, when the Brexit vote occurred we witnessed sharp downside volatility in US equities followed by a week-long recovery. When the Trump election occurred, we saw sharp downside volatility in US equity futures followed by hours long recovery. When Italy voted “no” to their constitutional referendum, and ultimately their PM Matteo Renzi, the US equities market reacted with a *Kanye shrug* and opened in the green.

kanyeshrug

Prime Minister Matteo Renzi has already announced his intention to resign, which would result in the prospect of a sixth PM in a decade. Although this action does not mean Italy will be leaving the EU, it does strike some similarities to Brexit in creating uncertainty in European markets. The country has now had 63 “new government” post-WWII, and it seems the US equities market has bigger things to worry about. Once again, US stocks have been deemed a place of safety during geopolitical destabilization as the S&P500 earnings recession seems to be a thing of the past.

What does this mean to me?

Historically speaking, December tends to be a strong month for stocks. Since 1950 the S&P500 has gained 1.6% on average with nearly all the gains occurring at the latter end of the month. The US economy has a significant amount of positive news in its corner, as the unemployment rate has dropped to its lowest rate in more than nine years of 4.6%.

Retail sales up 4.3% year over year.

retail

Energy prices stabilizing with oil trading at near 12-month highs.

We will be looking towards the Fed’s probability in raising the fed funds rate as inflation moves towards their 2 percent target.