Look At Things Differently
As any reader of this column knows, over the last three years or so, I tend to look at things differently. Sometimes I am right, sometimes I am off base. The most important thing to me is that my readers do some thinking on their own.
Too many columnists and blog creators hold their readers hands and walk them through whatever point they are trying to make.
I don’t do that. I could but I think it insults the intelligence of the reader and I am for the most part, lazy. I don’t want to have to explain every point I make ad naseum. Use your brain and you can come up with an opinion and a conclusion. research it if you must but keep your brain active I always say.
This column is a little bit about that and like every column I write, if you have questions or comments, email me back and we can have a dialogue.
Today, it’s the Santa Claus rally and the fact that this year, Santa is taking a very long time to get here.
Traditionally, the Santa Claus rally is tucked in right around Christmas to New Year’s Eve.
Traditionally, the activity towards the end of the year is dressing up or dressing down a portfolio managers position in whatever he thinks will make his year end results look better. There are also tax swaps and tax loss trades at the end of the year but they have become less and less an issue as far as the end of the year goes. It’s more about window dressing.
The idea is simple. If you have a few winners in your portfolio you add to those positions and if your whole portfolio looks stellar, you take those last scraps of cash and add to all your positions and your overall performance looks stellar.
There aren’t that many instances where the overall portfolio of any manger is stellar but they tend to accentuate the positive and try and reduce the negative.
It isn’t as big a thing as it used to be because money is now spread out over multiple asset classes and the returns pretty much are the returns. Mutual funds used to hold an outsized proportion of people’s money but it’s just not that big anymore. Sure there are trillions still in Mutual funds but those funds typical hold a plethora of different investment products to go along with the stock portion of their portfolio.
That Santa rally was the result of these major asset managers doing what I just described. However, even with the trillions they have, there really is not that huge influx or outflow of money from stocks because of year end adjustments.
The rally has already started and it has nothing to do with Santa. It has to do with the future and since the Fed may possibly be done with tightening the screws, the thought is that the Fed at some point after the first two months of 2024 might be lowering interest rates a touch and there you have it.
Markets look six months to nine months out. Markets are looking for a short recession and a fairly strong rally and that is what you are seeing. People aren’t dressing their windows, they are laying the foundation for adding an extension.
So, while you will hear some nonsense about a Santa Claus rally and how traders are prepping to take advantage of it by buying now, the real reason is much simpler, we are preparing for an economic trough which will fairly quickly turn back into a rally.