As Melbourne begins to re-open, having endured the world's longest lockdowns, the stock market has also just gotten through what is historically one of the most volatile periods of the year (Q3), and now we're on the final stretch home - I think I can hear sleigh bells in the distance. Could Santa Claus have arrived a little early this year? It looks like it.
In today's chart we take a look at how the stock market (US) has performed on average throughout the course of the year since 1964, and we compare it to the performance of the stock market in 2021 YTD.
The final quarter of the year has historically been the best performing quarter. This year however, the Santa Claus rally seems to have arrived a little earlier. We did see a breakout during the month of July, with a subsequent decline up until mid October, and now it looks like we're back on.
Although interest rates look like they will be rising from here, interest rates are still at rock bottom, too much cash is slushing around the system, and investing is no longer something old people do, I'm still bullish on the economy and financial markets. Is this forever? Of course not (in the short-term). Nothing is. Yet the headlines will make it appear that way.
If the headlines start to create a little angst as we edge toward the back end of the year, I want you to ask yourself these three questions, which will hopefully provide some perspective (full credit to Barry Ritholtz for these):
1. Is this resonating with me on an emotional or logical level? 2. How might this story look one year from now? In 10 years? 3. How much of this “News” is already reflected in stock prices?
Immersing yourself in the daily shrieking headlines is not only confusing, but quite frankly, largely a waste of time. Go enjoy the sunshine. And your freedom.