- Home
- >
- Fundamental Analysis
- >
- This month, it seems Santa Claus is coming to town! But next year, “you better watch out”
This month, it seems Santa Claus is coming to town! But next year, "you better watch out"
Rating:
Loading...It's December and time to deck the halls with boughs of holly.
Santa's performance for the Dow Jones Industrial Average has been fairly reliable over the past five years, with investors rewarded in every year except 2015. But in each of the years when Santa delivered the goods, the market was already trending higher — 2015, the exception, saw a weaker market so Santa stayed away.
The Dow pattern in 2018 is also lower but with jagged highs and lows, leaving some nervousness about whether investors will be left empty-handed.
There is no doubt it will take a big bag of quadruple points for the Dow to rally to 26,950 points, the October high. But it is not impossible that a dose of Christmas magic will be sprinkled on the index given the erratic trade we've witnessed.
Federal Reserve Chairman Jerome Powell played his role last week, transforming from Christmas Grinch to peaceful dove when he said U.S. interest rates were closing in on neutral levels. Powell's olive branch may have encouraged the Dow to bid farewell to recent lows, but is it enough to sweep the index 5-percent higher in one month, or more than 1000 points from its current levels, to reclaim the highs?
"The market fall in the last six weeks has discounted many of next year's problems. A bit of good news or just an absence of bad news could drive over-sold markets higher," said David Miller, executive director of Quilter Cheviot Investment Management.
"Earnings growth hasn't been reflected in share prices. Multiple contraction this year has been the most since 2002. Therefore, multiple expansion is quite possible from here," said Miller, who suggested revisiting technology stocks.
But Michael Howell, CEO of Cross Border Capital, warned the bear's grip will continue. "True bear markets typically suffer 30-50 percent price falls, and Wall Street's decline has been seriously lagging other markets until now." Howell recommended German bunds.
So what's ahead for investors? This month, it seems Santa Claus is coming to town! But next year, "you better watch out" or so the jingle goes.
Trader Georgi Bozhidarov Read more:
If you think, we can improve that section,
please comment. Your oppinion is imortant for us.
