Traders Losing Hope With Rare Year-End Market Crash

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Like kids on Christmas day, investors look forward to the Christmas season as they expect Wall Street to deliver the last stock market rally before the calendar year ends. However, it seems like it will only happen this year.

José Torres, a senior economist at Interactive Brokers, noted that “the Santa Claus rally is cancelled this year as the equity market navigates higher yields and contracting earnings. Seasonal tailwinds that have traditionally driven Santa Claus rallies pale compared to the plethora of headwinds the equity market currently faces.”

Right before Christmas, Wall Street stocks declined. Investors see the decline indicating that the Fed’s decision to raise rates affected the market. On 22 December, the S&P 500 fell 1.4 per cent further after being down as much as 2.9 per cent earlier. Nasdaq dropped 2.2 per cent while Dow went down 1 per cent.

The Australian market also saw a similar fate, with the ASX futures dropping 0.9 per cent while the S&P/ASX 200 index fell 0.8 per cent. Patrick O’Hare, the chief marketing analyst for, reported, “The momentum of the rally the stock market enjoyed yesterday has not carried over today. Better than expected third quarter GDP and initial weekly claims data has fuelled concerns about Fed tightening.”

Michael Gayed, a portfolio manager, noted that this year, the number of days the S&P dropped is exceptionally similar to the events that transpired in 1931. He added that the S&P 500 was down 14 per cent in 1931, and the numbers this year make other experts think that history may repeat itself.

According to other investment experts, the stocks declined modestly towards the Christmas break, and anyone looking for rebounds from the October lows will be disappointed. 
Lu Wang, the Markets editor at Bloomberg, noted, “The S&P 500 slipped 0.2% in the five days, bringing its monthly loss to almost 6%. That would be just the fourth-worst month of the year in a market that at times has seemed almost consciously bent on wringing optimism out of investors.”

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