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Stock advance pauses, but Santa is still coming to town.

Stock advance pauses, but Santa is still coming to town.

November 16, 2021
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After several weeks of big stock market gains, the market saw a slight downturn last week. We recently talked about this possibility and how a small decline during a strong advance is called a consolidation.

It’s possible this consolidation may last for a couple of weeks due to the recent heightened concerns over increasing COVID cases and lingering inflation worries. However, we also previously discussed how breaking news moves the market, not old news. COVID and inflation are both old news, so I don’t see this pushing the stock market down for the long term. Instead, I focus my energy on anticipating upcoming news events such as the possibility of weak Christmas spending. I bet this will be in the media in a couple of weeks but I don’t think it will be a problem because consumers have been purchasing robustly throughout the pandemic and I think spending will continue into the holidays.

And what about Santa Claus? In December and into early January the stock market can be visited by the Santa Claus Rally – don’t laugh, professional investors talk about this every year. Although Santa may have less to do with it than other factors. I look at this from a psychological point of view. When the market has a strong up year, like 2021, professional money managers and retail investors want to be a part of it. Investors that didn’t get in for most of the year suddenly want to buy in December to show they were invested. For this reason and other macro-economic reasons, I continue to believe the market will be modestly higher by the end of the year.

Photo by Srikanta H. U on Unsplash

 

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