2023-12-01 08:03:45
The U.S. stock market has entered the December Christmas market rally… is it over? (Brendan McDermid/reuters)
Christmas may come early this year for the stock market.
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Generally speaking, as Wall Street traders take the holidays to spend time with their families, the market will be thinner in late December, and the result of reduced volatility will be a year-end rally, commonly known as the Santa Claus rally.
This year, expectations were still optimistic, but November has seen a strong rebound, with at least one analyst warning that the Santa Claus rally may be over.
Amanda Agati, investment director at PNC Asset Management Group, said she doesn’t see any drivers that can realistically extend the rally into the end of the year. She also believes the Fed is likely to wait and see what happens and not take any policy action at its year-end meeting.
“I think between now and the end of the year, we’re going to have a very narrow range market,” Agati said.
If the entire Santa Claus rally has materialized a month early, analysts, strategists and fund managers should beware of this false move.
After all, going into this year, Wall Street expected stocks to end the year in the red and S&P 500 investors to lose money over the next 12 months.
The expected losses at the start of the year are almost unprecedented on Wall Street. But a year ago, this was completely understandable, as we were in the midst of one of the worst years ever for a 60/40 stock and bond portfolio.
But at the beginning of this year, the seven technology giants, with their enthusiasm for artificial intelligence, dealt a heavy blow to the fans. The boom market in 2023 was highly concentrated for most of the year, but the rally became more comprehensive in November as portfolio managers were forced to adjust their holdings in line with the index. (As of Wednesday, the S&P 500 was up nearly 20% for the year, and the Nasdaq 100 (^NDX) was up a staggering 45%.)
Almost every stock rose in November except for energy stocks and volatility. Cathie Wood’s Ark Innovation ETF (ARKK) – the poster child for pandemic investing – rose an eye-popping 34% in November. This was the Ark Innovation ETF’s best month since 2014.
But Agati believes the 2023 finale some people are waiting for may have already arrived.
“Our view is that we probably won’t see the Santa Claus rise because we’ve already gotten the turkey rise,” she said.
But don’t tell that to Carson Group’s Ryan Detrick, who just highlighted that volatility will drop significantly and make the market a little boring.
“What do you do to short a market that’s not trading?” he quipped.
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