Christmas EveFebruary 7, 2019 -
Categorized in: IAG News
Will Christmas Eve come again in the next few months?
Based on my calendar the answer is a definite no. It appears Valentine’s Day, Easter, and Mother’s Day are more likely.
Checking in with the financial markets, the odds seem a little higher.
Christmas Eve 2018 was the end of an ugly week in the financial markets. Many individual investors showed up eager to sell their long-term assets on Christmas Eve.
In the previous six trading days, the S&P 500 large cap U.S. stock index had fallen over 9.5%. That inflicted a significant amount of emotional pain which triggered a knee-jerk reaction to sell whatever was causing that pain.
Compounding the problem of overreacting individual investors was the lack of institutional buyers who were wisely spending time with their families instead of monitoring the markets. This resulted in fewer buyers just as the number of sellers swelled.
Looking back on Christmas Eve we can see that it was an inflection point as the S&P 500 has risen over 15% (as of this writing on Tuesday morning) since that fateful day.
Markets have a tendency to test inflection points to see if they will hold up a second or even a third time. Sometimes these retests occur shortly after an inflection point. Occasionally these retests occur months or even years after an inflection point.
January provided investors with a tremendous bounce up from the Christmas Eve panic selling. Investors should enjoy the statements that they will be receiving in the next few days.
But please also remember that it is quite possible that we may revisit Christmas Eve at some point in the future when it is not on your calendar.
Quote of the week: Warren Buffett: “We do not have, never have had, and never will have an opinion about where the stock market, interest rates or business activity will be a year from now.”
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