A Big Month Ahead
Investors are giving their warmest season’s greetings to the month of December, with a Santa Claus rally high up on their wish lists. This may be one of the S&P 500’s best years on record so far, but it’s never over until it’s over!
25% gains to the good, the US Federal Reserve has decided markets have had enough stimulus for one year. Cutting interest rates and loosening the money supply is just a temporary painkiller to stock market jitters. And now, Fed Chair Jerome Powell doesn’t want to risk overdosing investors and leaving himself without any ammunition in case of a recession. Let’s keep our fingers crossed that December’s economic data and trade war tensions don’t dampen merry market sentiment, or give Jerry too much to think about.
For the holiday season to go to plan, economists are shooting for a score of 49.4 from ISM manufacturing activity data, set to be released today. Then, on Thursday and Friday, OPEC and Russia should extend their oil production cutting agreement, and 183,000 jobs should be added to the economy. 46,000 General Motors employees are off the picket line and back on the production line, so that should boost those odds.
Judging by the past two decades of market history, it’s hard to go wrong playing the markets in December. While electronics retailers have historically lost 4.5% during the month, that’s paled in comparison to 4% gains clocked by homebuilding, home improvement, chemical, and internet stocks. Tax-loss selling in the first half of the month is common, followed by a bullish rally as the beaten-down stocks are pounced upon by opportunists. Combine that with Christmas bonuses, some festive cheer, and investors placing buy orders in anticipation of that very rally, and the stock market could end the year with a bang! Let’s at least hope for better than last year!
