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  • Matthew Lawson

Santa Claus Rally?

November and December have historically been two of the best months for stock investors over the past 80 years. Will this year follow the trend and deliver positive monthly returns to finish out 2022?


One thing I believe most investors are looking forward to is putting 2022 behind and move into 2023 with an opportunistic outlook. Since January of this year, the market has been focused on the Federal Reserve and their intention of lowering inflation through higher interest rates. If we go back to the 4th quarter of 2021 the market was anticipating the Fed to raise interest rates in the back half of 2022 or first part of 2023 at the earliest. The market was caught off guard to say the least. This has been the most aggressive Fed since the 1950s. The market was not anticipating inflation to run as hot and for as long.


On a positive note, the past two months have shown inflation through the consumer price index that has been declining and perhaps the trend has changed to the downside. If so, the Fed will likely slow down the pace of interest rate increases and that will more than likely benefit stocks and bonds. Speaking of bonds, this has been the worst year on record for bond investors since the 1930s. Going back almost 100 years just about anytime stock prices declined bond prices remained relatively steady and provided a place for some stability.

We continue to remain optimistic going into 2023. It appears based upon the Fed fund futures, the Fed will raise interest rates ½% in December, ¼% in February then a pause to assess the overall economy. Here is a list of some positive tailwinds since October:

  • Crude Oil from $130 to $80

  • Goods prices tanking

  • 10-year treasury yield falling from 4.30% to 3.70%

  • Fed set to become more predictable

  • CEO confidence bottoming

Also, the year following a negative return by the S&P 500 during a midterm election cycle the market returned on average around 24%.


We wish you a joyous Christmas and a prosperous New Year!


Matt


The views expressed are not necessarily the opinion of Cadaret Grant, and should not be construed directly or indirectly, as an offer to buy or sell any securities mentioned herein. Investing is subject to risks including loss of principal invested. Past performance is not a guarantee of future results. No strategy can assure a profit nor protect against loss. Please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice.


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