We have been split days since last month for the year, and the S & P500 is on the verge of getting its best performance since 2013. Historically, in most cases, the rally continued in December. Perhaps the exception is the December 2018 sell-off. It was also the worst month for the US markets since 1931. Some of the factors that catalyzed the sale were still there – slow global economic growth, for example, but according to analysts, we have reasons to the December sell offs are very few. About 75% of the shares in the S & P500 are moving up. Last year, they were less than 50%. And the stocks that are lagging this year are catching up with their major indices, which suggests that investor optimism is back for the overall economic climate. Small-cap, Russell 2000 is also recovering, up 4.3% this month, outpacing the SPX by 3.5%. Cyclical stocks in the banking and industrial sectors also surpassed SPX this month. It seems that the markets are “in good hands” and that they will end in positive territory by the last day of the calendar.
Wall Street’s strong start on Wall Street last week was plagued by the last two days of low liquidity due to Thanksgiving, with major stock indices returning 50% of their profits. However, the foundation remains on the side of buyers, with expectations for new highs in the first week of December. Speculation about US-China trade relations has become more and more optimistic, and over time, fear has evaporated from the markets and been replaced by euphoria.
This week we will see what will happen on the trading front, will there be anything new about Brexit and, of course, the economic calendar, which promises us many events and, of course, importance. Starting Monday, we are launching a series of PMI reports in Asia, Europe and the US. They may influence the short-term trend of the respective currencies. There is a ruling on Australia’s base rate on Tuesday and Canada on Wednesday. On both fronts, no change in interest rates is expected, but it will be interesting to hear what the central bank’s guidance on the monetary policy model is for the new year. The monthly data on private sector employment are published on Friday. A report that, in the past, has more than once been accustomed to offering serious market surprises and even determining the weekly return on major US stock indexes as well as the dollar.
Trader Aleksandar Kumanov