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Santa Claus Rally!
By Mike Conlon | December 22, 2009
Historically, the month of December has been the best performing month for stocks. Much of this can be attributed to “window-dressing”, the practice of fund mangers pushing up stock prices to make their portfolio performance look better for year end. This is where the nickname “Santa Claus Rally” comes from; that the cheery rotund man in red is bringing you a Christmas gift in the form of higher returns!
Today marks the highest level for the equity markets in all of 2009– despite the earlier downward revisions to GDP that we mentioned earlier. Also to note that gold and oil are down, and the US dollar (USD)is seeing some strength against all major currencies except the Canadian dollar (CAD) which is showing strength over the last three days due to improved economic conditions and the possibility of near-term rate hikes.
I often mention the correlations between the different markets so its important to note where other markets are trading with regard to the forex market. Again we are seeing a dollar up, stock market up scenario that is a continuation of the condition that I spoke about yesterday– that the anti-dollar sentiment may be fading from the markets.
So in any event, be wary of the “rosy” picture of the markets that is being painted for you going into year-end. While its OK to attend the party, be wary of the hangover that inevitably occurs once the New Year comes around.
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Topics: What To Look At In The Market | 1 Comment »
December 23rd, 2009 at 10:08 am
I think that the USD is getting stronger because China is buying a lot’s of it now.
Why now? Well, during during this period of the year the volume is thin, so you need to buy less USD to make it stronger.