πππIt is that magical time of the year! In Singapore, the satay is grilling, the chilli crabs are steaming and investors everywhere are eagerly waiting for their favourite seasonal gift : the Santa Claus Rally.
Historically this refers to a market surge in the final 5 trading sessions of the year and the first 2 of the new year. It is built on a cocktail of holiday cheer, optimistic portfolio win dow dressing and reduced trading volume. The question on everyone's lips this December is : Will Santa show up this year or is the rally already priced in?
The technical patterns for major indices are currently mixed, suggesting a market in search of direction after a massive run this year.
The Grinch at the Bank of Japan?
Just as visions of sugarplum profits dance in our heads, a major macroeconomic Grinch is lurking in Tokyo : the Bank of Japan (BoJ).
The BoJ is the last major central bank holding interest rates in negative territory. If it were to unexpectedly hike rates, even slightly, it would be a seismic shift. This move could potentially :
Drain Global Liquidity: Japanese investors are major players in global debt markets. A rate hike in Japan might encourage them to pull capital back home, reducing the pool of global liquidity that has fueled our market rally.
Trigger A Correction : This withdrawal of easy money could cause ripples across all asset classes, potentially triggering a sharp unexpected correction just as we are settling for the holidays. It is the ultimate festive flop for the global market.
My Portfolio Strategy : Cash vs Cheer
So how are we playing this volatile holiday season? The choices are stark: stay safe in cash or buckle up and ride the AI fueled train?
Option 1: Hiding Under the Bed (Staying in Cash)
There is a valid argument for staying in cash and waiting for a pullback. The market is stretched thin. Volatility is creeping in and the fear of a BoJ induced correction is real.
Staying liquid means you have dry powder ready to buy the dip when (not if) the Grinch appears.
The humour is found in the paranoia. Imagine explaining to your family that you can't buy gifts because you are waiting to see how low can the market drop before you deploy capital.
Option 2: Full Speed Ahead (Fully Invested)
The alternative is full optimism. Ignore the noise, stay fully invested and ride out any potential drawdowns.
The AI revolution, the potential for further Fed rate cuts next year and strong corporate earnings (like those from the Magnificent 7) are powerful bullish forces. A dip might just be a blip in the grand scheme of a long term bull market.
The Verdict
Right now, the vibe is cautious optimism. Many investors are taking profits from their massive gains this year but remain committed to long term positions. It is a delicate balance of sipping eggnog while keeping one eye glued to BoJ news feeds.
Whether Santa brings gifts of new highs or the Grinch steals our gains, depends on whether technical patterns hold strong against a potential global liquidity squeeze. Stay safe, stay smart and may your portfolio be merry and bright!
@Tiger_comments @TigerStars @Tiger_SG @TigerClub @CaptainTiger
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