This Blog is very much in line and explores a possible ‘Roadmap’ for how the remainder of 2014 might play out.
Some of you reading this will be aware of certain ‘Seasonal Investing’ patterns - the classic being “Sell in may and don’t come back until St Ledger Day” - which encapsulates the fact that the UK stockmarket, more often than not, outperforms over the Winter months compared to the Summer period.
So, let’s make a huge assumption - i.e. we will get a Santa Rally this year…..
Therefore, if we are to get such a pleasant Xmas Gift - what is likely to happen before it? I suggest the most like Roadmap would be as follows:
- Weakness overall in the Markets through mid November to perhaps early December
- This would then create the conditions (i.e. a low market that might be oversold) from which a sweet Santa Rally can easily occur.
If markets continue to go higher through November and early December, it seems unlikely we can get a Santa Rally and markets would be very overbought if this was the case - and a Drop around Xmas might be more likely in this Scenario.
To give this some more ‘colour’ - let’s consider what happened last year by looking at this chart:
As per a recent Tweet and my comments in a Blog today on AZN, I will also try to sell some stuff to reduce my Long Exposure and add to Cash…..but it makes sense to still have significant Long Exposure for any Santa Rally as they can be very powerful.