Waiting with baited breath…12/15/2015 By: Angela Bender
December is historically a robust month in the Equity markets as measured by the S&P 500. This period of time has even given birth to the famed nickname the “Santa Clause” rally.
This year, along with the strange El Nino Weather pattern in the Northeast, we are left to wonder is Santa Clause indeed going to come to town. Today though is the beginning of the two day Federal Reserve Meeting that ends on December 16th, with a press conference to follow. Market participants now widely anticipate that the Fed will begin liftoff of interest rates from the zero bound policy. While this .25% (expected) interest rate move has been priced into markets for some time, the key question left unanswered and so feared by the market, is what will be the continued tightening policy schedule? And in that void of expectations is where I believe lives the greatest risk to the markets. Sentiment for the Equity market has turned slightly negative in December. But the market has clawed to stay above 2000 on the S&P, that level marks a significant line of resistance between the bears and the bulls. The one thing we can know for sure is that uncertainty in markets causes’ volatility.
And volatility in markets makes it very difficult to make money! Since the beginning of December we have only had 4 up days in the S&P 500.
To help clients manage this period of time we have raised cash levels in our portfolios to protect capital and we continue to monitor for opportunities to deploy capital. To be good at any skill it takes practice and patience. I have learned through many years of investing that you cannot rush the decisions. You have to wait for the market to develop its belief of forward earning expectations, and then it will lead you on how your capital should be positioned. As we get started on Fed watch, and the volatility that will surround this event, I caution you to wait for the market to give you guidance. With that as our guide, it is very likely we will be on the right side and correctly positioned.
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