Hans-Jörg Naumer (Allianz GI) | “Will there be a year-end rally?”. Once again it’s time to ask the usual question of whether the stock markets will rise over the next few weeks or not. It’s understandable. Although the markets are extremely efficient according to the economic theory, there are, however, some seasonal patterns like the famous year-end rise. If we revise the data since 1965, in general terms, the months of December have been habitually positive.
This year, it seems that the year-end rally in the equities had already begun in October, although this has slowed down in the last few days. It has not been an easy year for the markets, which have been on a roller coaster ride. The data has sometimes gone in contradictory directions, without offering any clear signs for monetary policy. Whatsmore, it may seem strange that, for the market, weaker figures are considered good news. But this is because an economic slowdown can push the central banks towards a more relaxed policy. There have been some positive signs coming out of China, where they are beginning to reduce Covid restrictions. In the meantime, the technical situation in itself seems fairly stable. In the equities markets, the main indices have beaten the moving averages at 200 days. Meanwhile, the indicators of relative strength should show little selling pressure. In contrast, the decisions on monetary policy and the economic data can still drive significant movements in the markets, given that investors may have to change some of their views. A year-end rise still cannot be taken for granted. At the end of the day, it’s possible that it has just been anticipated.
