It is one of Wall Street's most popular, longest-running conventions: the Santa Claus Rally has become its own self-fulfilling prophecy, leading to 11th hour gains at the end of any given calendar year, and lasting just into the new year even in the absence of good (or as per the New Normal, bad) news.
Courtesy of Oppenheimer's Ari Wald, here is a quick reminder of what it is:
Most world markets have reopened following the holiday weekend, but trading volumes remain significantly muted. Asian and European shares advance modestly amid low volumes with U.K. and Ireland closed; S&P futures are little changed while the dollar rose and oil extended its longest winning streak in four months.
2016 was chock-full of surprises, both in markets and in politics.
As Goldman's Allison Nathan explains, the year began with a perfect storm of worries that had become all too familiar already in 2015. Oil prices plunged and fears of faltering growth and a sharp depreciation of China’s currency escalated, driving disruptive sell-offs in credit and other risk assets. Confidence in global growth faltered, particularly after an anemic US GDP report for Q1.
With Trump's border tax adjustment looking increasingly likely, the stock market - as JPM has warned in recent days - is starting to fade the relentless Trumponomic, hope-driven rally since election day instead focusing on the details inside the president-elect's proposed plans. And, as explained earlier in the week, if the border tax proposal is implemented, economists at Deutsche Bank estimate the tax could send inflation far above the Federal Reserve's 2% target and drive a 15% surge in the dollar.
This article by David Haggith was first published on The Great Recession Blog:
Since Trump’s election, the US stock market has climbed unstoppably along a remarkably steep path to round off at a teetering height. Is this the irrational exuberance that typically marks the last push before a perilous plunge, or is the market reaching escape velocity from the relentless gravity of the Great Recession?