WASHINGTON, December 22, 2016 – As we suspected it would, stock trading volume has been gradually contracting as Christmas Weekend approaches, and along with that shrinking volume have come shrinking stock prices in many sectors.
The financials in particular are backing off a bit from their spectacular post-election rally, which was buttressed last week by the FOMC’s 0.25 percent increase in interest rates.
Both Trump’s victory and that interest rate hike, small though it was, finally puts a floor under the price of financial stocks. In addition to the banks, this sector includes the insurance industry, certain non-bank investment and lending companies and purely mortgage REITs. All these remained in fall-revised financial sector included in the S&P 500 financials after REITs primarily owning property were spun out late in the third quarter into their own sector.
Silliness and triviality mars trading action in holiday-influenced markets. Many players will be out of the game now until after New Year’s Day 2017, leaving the field to those wild and crazy guys (and/or computers) running high-frequency trading (HFT) operations, so anything can and will happen to stocks between now and then, making this something of a treacherous time to put on new positions.
We’ve done a little fiddling in our portfolios (more on this in our companion column), some good, some bad. But aside from this, we won’t be having much useful to say, aside from relevant surprise tidbits, probably until January 2, 2017. But stay tuned. With ISIS making its usual threats (and occasionally delivering on them or claiming to), exogenous events could jump up and surprise us, perhaps requiring emergency portfolio repairs.
But aside from this, bets and/or investments made in low-volume markets will often turn on you—and us—so we’ll remain cautious until the New Year.
It’s a bit disappointing, this… Like others in the financial punditocracy, we were hoping to see the Dow close atop that magical 20,000 barrier. But now that Santa’s elves (and Amazon.com warehouse employees) are working 24/7 on Christmas deliveries, that mind-boggling but otherwise meaningless number may become a 2017 event if it happens at all.
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