Nice Wall Street rally begins the week before Christmas. Is it real or is it window dressing in preparation for an upcoming January mass portfolio dump?
WASHINGTON, Dec. 21, 2015 – Short column today as Mr. and Mrs. Maven prepare for a short jaunt to Colonial Williamsburg, just downstate from the nation’s capital. After 2015’s brutal market beating, we both figure it’s time to recharge those batteries, the better to prepare for what’s likely to be an even weirder 2016 in all markets. All investors have to show for their returns in 2015 is the lump of coal that’s already lodged in their sooty Christmas stockings.
Not only is 2016 an election year, perhaps the strangest in recent memory with the current matchup appearing to pit a shoot-from-the-hip faux Republican populist vs. a stiff-necked, doddering, utterly undeserving dowager Democrat empress whose only qualification for the presidency is an utterly botched stint as secretary of state coupled with unbridled greed and a sense of entitlement, because—war on women.
With this kind of bizarre choice likely to confront an increasingly skeptical electorate, it’s no wonder that we expect 2016’s stock market action to come out of the gate as bad or worse as it did in 2015.
In the meantime, the Fed has finally met Godot and has started raising interest rates, something the central bank has been threatening to do for what seems like a decade. The jump in rates is so miniscule that at least initially, no one should really notice. We’ll get a better feeling for this in January.
As for now, stocks will probably trade with a modestly up-bias for the rest of 2015, given what market technicians call a seasonal bias—meaning that historically, stocks generally trade in the green zone from around Christmastime to New Year’s Eve. Just because.
Actually, a lot of this can be attributed to portfolio adjustments by big investors, hedge funds and mutual funds. As we can tell from last week’s horrific selling tsunami, all these bigwigs, aided by the usual HFT suspects, have probably disgorged their most embarrassing positions, and are now picking up what they think will be the winners, at least in Q1 2016.
Next, they generally report their holdings as of the last day of a calendar quarter so, having dumped the junk, they can load up their portfolios with what they believe will be 2016’s darlings and proclaim their stunning genius to you in their next quarterly report. It’s another sham that the SEC doesn’t bother to deal with.
Today’s trading tips
At the suggestion of one of our advisory services, we’ve picked up a small position in MUB, the symbol for the iShares Municipal Bond ETF. Just because. We’re nervous about putting money into pretty much everything else.
Everything else except REM, the iShares Mortgage REIT, which is currently paying out a quarterly dividend in excess of 14 percent. That won’t last, of course, as either the price of REM will go up in the new year or the dividend will get cut as REM’s basket of mortgage REITs starts cutting dividends. But right now, REITs and utilities have been catching a “safety” bid in the market after taking a beating for most of 2015’s second half. This may not last, but it’s the best we can do in a market that seems to be floating in the middle of a moat made of quicksand.
Otherwise, we’re going to keep our nearly 50 percent cash position for now and try to enjoy the holidays. Having some plain old fun is much better than watching your gains evaporate, which could easily characterize the state of this sport for most of those trying to make money in equities during a highly regrettable and forgettable 2015.
Columns will be sporadic for the next couple of weeks. Enjoy your holidays, and we’ll jump in from time to time if anything interesting shows up.
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