Others expect a year-end rally like we do - November 13, 2019

Others expect a year-end rally like we do

Just days after we have published our blog post about the effects of the holiday season on the markets, another analyst voiced his opinion about how S&P 500 can gain 3% during this season. Just like we did, he also has historical data to support his expectations. Let’s look into his reasonings!

Holiday season is usually a strong period on the markets. We wrote about this last week, expressing our belief that stock markets may fly during the last weeks of the year. We’re not alone with our predictions about the market.

Year-end rally is expected

MarketWatch has published an article just days after ours that expects an uptrend. They talked to Tom Lee, head of research at Fundstrat Global Advisors, who predicts that “U.S. stocks will benefit from another Santa Claus rally”. Lee has also underlined to their clients that “this effect [has been] very strong in the last 20 years.”

Furthermore, MarketWatch’s article noted that “when the S&P 500 was up more than 9.5% from the beginning of the year through the first week in November, the average further gain is 4%”. This happened 10 out of 10 times, which is extraordinary. All this led Lee to expect a gain around 3% for S&P 500 during this so-called “Santa Claus rally”.

Everything points to it

We believe that everything points to further growth. Fed is running a QE-program, which helps the economy. (They call it differently, but it brings more liquidity to the markets, so we believe it’s a QE-program in reality.) Ever since it was introduced in October, S&P 500 rises week by week. What’s more, there’s a positive sentiment about the possible ending of the trade war between China and the US.

Lee has also shared his views on the trade war: he doesn’t believe that it “has to be resolved to support the rally”.  He has another very interesting thought: “The U.S. outlook isn’t dependent on trade, it’s dependent on positive population growth.” This is unique among wealthy countries, which makes him believe that the US is in a good place for further growth.

Be positive, but be prepared

Although the outlooks for the end of the year are good, there are external factors that can change the expectations. Lee believes that a hard Brexit (if it happened) could be something like this. We’d like to add that there are always uncertainties on the markets, so it’s always good to be prepared to unexpected turns.

The best thing that one can do is to have a diversified portfolio. Long-term, emotionless thinking is also a great asset for every investor. And as we pointed out last week, gold might be especially good in the future, as demand for it goes higher and higher. It’s also good to focus on different asset classes, not just stocks, when investing.

Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instrument. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. Innovative Securities’ Profit Max has a diversified portfolio, which contains liquid instruments. This way, our clients can maintain liquidity, while achieving their personal investment goals on the long term.