“Santa Claus is Coming to Town”… Bah Humbug.
In most years, we can see a rather clear trend for December performance. However, 2018 is an exception. The last month of the year is historically positive for stocks, and we often hear of the “Santa rally”. Given what we’ve seen the last couple months, though, all speculation is up for grabs.
November was a negative month until this past week, which marked the best five day performance for major averages in over two years. The mid-term elections, while settled, produced a “sell on the news” reaction from investors. Perhaps the Democratic takeover of the House of Representatives was larger in scope than expected, but it certainly wasn’t a surprise. Republican control of the Senate means that almost anything the House might propose will be neutered unless there is bipartisan support. The pre-Thanksgiving period was marked by angst of interest rate hikes, tariffs, and fears of worldwide economic slowdown. This past week was rescued by dovish statements from Federal Reserve Chairman Jay Powell, optimism that perhaps a truce on tariffs can be achieved at the Buenos Aires G20 meeting, and terrific consumer spending on Black Friday and Cyber Monday. All in all, November was a topsy-turvy month that required antacids most days. The sizable mood swings led to exacerbated market gyrations.
As a result, it’s hard to predict what December will bring. By the time you receive this missive, there should be more clarity on tariffs. A truce or at minimum a promise to work with China more fruitfully would be good news. Anything resembling a hardline stance will possibly eliminate last week’s nice gains. We’ll also need to see consistent language from the Federal Reserve. Yes, Powell’s words were soothing, but they can easily be contradicted by other directors’ hawkish comments.
On another front, I’m in Thailand as we speak, and will not be returning to the office until the 17th. Access to communication will be spotty, and certainly not timely due to the eleven hour time difference. If you have questions or concerns on the financial services side, my terrific team members Kelley, RC, and Christine can assist. For tax or accounting issues, please contact Angie, Mike, or Todd. It frankly gives me great confidence to leave the office in such good hands.
2018 has been a frustrating year on Wall Street, and December will either provide a nice finish or more disappointment. The past few years have been positive, so a slightly negative year isn’t out of the ordinary. Perhaps Santa will reward us with a solid year-end rally. I hope not to repeat Bah Humbug.
Most importantly during this holiday season, spend time with people you love. I look forward to sharing my Thai experiences with you upon return.
Regi stered Representative
The opinions expressed in this letter are those of William Schiffman and should not be construed as specific investment advice. All information is believed to be from reliable sources; however, no representation is made to its completeness or accuracy. A ll economic and performance information is historical and not indicative of future results. Diversif ication cannot assure a profit or guarantee aga inst a loss. Indices are unmanaged and do not incur fees, one cannot directly invest in an index.