Home About Archives RSS Feed

@theMarket: Has Santa Claus Come & Gone?

By Bill Schmick
iBerkshires Columnist

The rally continued in the stock market as investors abandoned bonds and bought stocks hand over fist. Many think the best is yet to come, since the traditional end-of-year Santa Claus rally is still ahead of us.

However, between now and then, we have the Federal Open Market Committee meeting next Wednesday. The bond market is betting on the following: that the Fed Funds rate is raised by one quarter of one percent, and the FOMC meeting minutes indicate that the Fed may raise rates two more times in 2017. Anything more than that would be hawkish and most likely cause the stock market to correct. That happened last year and cut short the Santa rally.

If the Fed's actions, on the other hand, are in-line with expectations (or even more dovish) the chances are stocks will continue to rally and so will bonds. Although most investors focus almost entirely on the stock market, which has soared since the election, few realize the devastation that is occurring in the bond market.

I have continually warned bond holders that someday they would face Armageddon. It seems to be happening now. During the past three weeks, investors sold over $2.7 trillion worth of bonds. Almost a like amount of money has found its way into the stock market. But I suspect bonds are due for a relief rally fairly soon.

Aside from the upcoming Fed event, one must also look at the nature of the Santa Claus rally. Usually, investors sell stocks during the first two weeks of the month. It's called "tax-loss selling" where investors establish capital losses to offset gains that they may have booked during the year. This usually depresses stock prices across the board. After the selling abates, investors then buy back stocks during the last two weeks and into January of the following year.

This year, however, that has not occurred and with a good reason. Investors expect that under the Trump administration, the capital gains tax will be lowered giving them an incentive to hold on to their stocks until 2017. Given that behavior, stocks might be getting bid up now only to see disappointment in the last two weeks of the year.

The S&P 500 Index has already exceeded my target for the year (2,240). It is now 10 points higher at 2,250, which is a nice round number. There are some traders who believe that we can climb even higher. Some say the Dow could reach 20,000 (another round number) before the end of the year. Certainly, since we are only a few hundred points from that mark, there is nothing stopping investors from chasing stocks higher.

To me that's pure gravy.  I had been expecting a mid-single digit return for the market and year-to-date we have gained a little over 6 percent. Close enough for government work. So what to do between now and the end of the year?

Sit tight and enjoy the fireworks. In the very short term anything can happen.  If we don't have a pullback in December, chances are we will have one in January, but not to worry. I expect that the stocks will continue to have an upward bias at least through the first 100 days of Trump's reign.
 

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

0 Comments
     

Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
Hinds Pitches Aid For Rural Schools; Transportation In State Budget
Adams Selectmen Honor Thunderbolt Skiers For Mountain Rescues
Six Qualify to Regional from Pittsfield Pitch, Hit and Run Competition
Adams Youth Summer Basketball League Sets Registration Dates
Mildred Elley Graduates Ready To Achieve
Williams Softball Splits First Two Games of NCAA Super Regional
Pittsfield Honors Police Officers Killed In The Line of Duty
Mayors' Fitness Challenge 2018 Kicks Off on Saturdays
North Adams Committee Lays Out City Clerk Transition Plan
Hoosac Valley Elementary Students Give Police A Boost

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (258)
Independent Investor (352)
Archives:
May 2018 (5)
May 2017 (3)
April 2018 (7)
March 2018 (6)
February 2018 (7)
January 2018 (7)
December 2017 (8)
November 2017 (5)
October 2017 (5)
September 2017 (5)
July 2017 (2)
June 2017 (8)
Tags:
Oil Japan Bailout Pullback Rally Europe Metals Commodities Europe Currency Interest Rates Wall Street Stimulus Energy Housing Retirement Selloff Fiscal Cliff Crisis Euro Markets Taxes Deficit Congress Greece Recession Economy Banks Jobs Debt Ceiling Stock Market Election Federal Reserve Debt Stocks
Popular Entries:
The Independent Investor: Don't Fight the Fed
@theMarket: QE II Supports the Markets
The Independent Investor: Understanding the Foreclosure Scandal
@theMarket: Markets Are Going Higher
The Independent Investor: Does Cash Mean Currencies?
The Independent Investor: General Motors — Back to the Future
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: How Will Wall Street II Play on Main Street?
The Independent Investor: Will the Municipal Bond Massacre Continue?
Recent Entries:
The Independent Investor: Are Americans Saving Enough for Retirement?
@the Market: Stocks Look Ready to Reach New Highs
The Independent Investor: What's Up With Oil?
@theMarket: China Worries Dominate Markets
The Independent Investor: Financial Scams Targeted at Elderly Are Epidemic
@theMarket: Peak Earnings Versus the Yield Curve
The Independent Investor: The Opioid Effect
@theMarket: Earnings Up; Stocks, Not So Much
The Independent Investor: Why the Tax Cuts Are Unpopular Among Americans
The Independent Investor: The Facebook Fallacy