I still believe in a Santa Claus rally. We’ve had a post-Federal Reserve meeting selloff. That should run its course in the next day or so. Looking at the charts it looks like we should be bottoming around this area. Even as the averages have held up, some stock groups have been punished with deep corrections. This is cycled through the market and recently has hit the large-cap tech stocks which held up the longest. This is normal in a correction.
Normally, the Santa Claus rally starts five trading days before the end of the year. That coincides with Santa Claus’s vacation. The rally should extend into the first couple of trading sessions of the new year. It’s not unusual to get a bit of a pullback after that. Most of the tax loss selling that’s done towards the end of the year is over with now. Some will hold profits in stocks for right after the beginning of the year to sell. That’ll give us a little setback right after the beginning of the year, however we then should continue to rally. I believe we are still within the grips of a bull market.
The Federal Reserve is still accommodative. However, they will start to take some of the accommodation away. They are tapering their bond purchasing, however they have not started their tightening process and won’t do so for a while. It’s important to remember that the market climbs a wall of worry. It’s likely that the market will continue to rise unless the economy weakens dramatically. So far, that’s not an issue.
You can get corrections and even bear markets at any time for any number of reasons. However, keep your view long term and your allocation sound. Let us know if you have any questions.
The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.