It’s that jolly time of year again.
The bears are in hibernation and the bulls are getting fat. I’ve been seeing reminders here and there: Decembers are good for the market, don’t you know?
Very well. Without pretending I did the research, let me steer you to Variant Perceptionfor some stats to back up the December-to-remember claims.
The moral of the story: Buy today and come back once your New Year’s hangover wears off.
If, however, you’re monitoring potential reasons the consensus will get caught in a long-winter’s nap, you don’t have to look much further than taper talk.
In every December on record till now, the market has not had to deal with “tapering.” To be sure, I am confident the Fed is NOT going to taper in December. And though a lot can happen in three months, I’d be willing to bet they don’t taper in March either.
But guess what? What I think generally doesn’t matter to the consensus.
What matters is how the crowd wrestles with this idea. Let’s assume incoming data remains positive. Belief that the Federal Reserve tapering decision is data dependent will go a long way into feeding tapering expectations. Further, belief the Federal Reserve is dependent on growth and unemployment levels will be the primary catalyst should tapering concerns flare up.
This isn’t to say the December exclamation point on this year’s rally will be denied. December may turn into another positive data point. After all, though the charts of major US equity averages appear extended, they still look quite strong.
But it is to say be careful not to become complacent. If too many find comfort in the history of December, the market will become vulnerable. Just because there’s egg nog to fall back on, doesn’t mean the jolly souls won’t freak out if they think the punch bowl is going to get taken away.
S&P 500 futures are at record highs, but momentum isn’t confirming the move:
Can someone please pass the punch?
And then can someone explain what it would mean for stocks if bond prices are propelled higher here?