INSUBCONTINENT EXCLUSIVE:
A year after the US stock market plunged, many investors believe conditions are in place to avoid another year-end pullback and possibly set
the stage for a rally to finish off 2019.
A more accommodative Federal Reserve compared with a year ago is an important argument for
investors who are confident the market is unlikely to see a repeat of 2018's swoon.
Last year, investors were concerned the Fed was
raising interest rates too quickly
By contrast, the Fed has been cutting rates this year, and while the central bank is not expected to lower rates again in December, it also
is not expected to raise them.
Another change from a year ago, cited by investors: Stock markets globally are more synchronized in their
strong performance.
"The prospects this year are better," said Michael Antonelli, market strategist at Robert W
"It's not just the US that's doing well right now
It's happening in lots of places around the globe, and that puts investors in a more risk-taking mood."
One wild card for markets heading
into year-end is the United States' trade war with China
The dispute remains unresolved, but there is optimism about a preliminary US-China trade agreement that could also lift stocks into the new
year.
Investors are still wary of last year's stock market collapse
The benchmark S-P 500 fell 19.8 per cent - barely avoiding a bear market - between Sept
The index's 2.7 per cent collapse on the eve of the Christmas holiday marked the bottom, and the S-P 500 registered its biggest
percentage decline for a fourth quarter since 2008, the height of the financial crisis.
"It's in the back of everyone's mind
We're all worried if there's going to be another big selloff in December," said Ryan Detrick, senior market strategist at LPL Financial in
Charlotte, North Carolina.
"We don't think so," he said
What's more, with the current strength in markets globally, "you could have a chase into the end of the year."
Equity indexes around the
world have joined US stock averages in recent weeks in setting new highs
So far this year, Europe's Stoxx 600 is up about 19 per cent and recently hit its highest level in more than four years.
At this last
year, the S-P 500 was up about 1 per cent for the year to date, but the European index was down about 9 per cent
With stock performance at the very end of the year, there is often more at stake than just feeling good around the holidays.
The last five
trading days of the year and the first two of the new year comprise the traditional Santa Claus rally, according to the "Stock Trader's
Almanac."
In 2018, the market bounced back after its Dec
24 plunge, resulting in an overall gain of 1.3 per cent for those seven trading sessions - right in line with the historical average, based
on the almanac's data going back to 1950
But any absence of a Santa Claus rally could portend rough times for the market in the months ahead.
"Santa's failure to show tends to
precede bear markets, or times stocks could be purchased later in the year at much lower prices," the almanac says.
A year-end rally could
be derailed by any upset on the US-China trade front.
"We're six weeks removed from the announcement there was going to be a trade deal
between the US and China, and it doesn't seem like we're necessarily closer to hearing about that deal or what it entails," said Brian Nick,
chief investment strategist at Nuveen in New York
Yet, "the market has continued to push higher on most days on optimism the two side are still talking
So there's room for disappointment there for sure."
Also, Nick said, the market could have trouble rallying into year end given the recent
"It feels like we maybe we got the Santa Claus rally a little bit early this year."
Any sign of disappointing sales over Black Friday and
the holiday season could be another risk, strategists said
But there are plenty who still expect holiday cheer for Wall Street this year, and upbeat news on trade would only add to that view
"Between now and the end of the year, I'm assuming there will be a Santa Claus rally," said Tim Ghriskey, chief investment strategist at
Inverness Counsel in New York.