US Stocks: Three reasons for the Santa Rally, and why a hangover could come in early 2022

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Markets have been cheerful in the festive season – but explaining the S&P 500's new highs cannot be only labeled a 'Santa Rally.' There are three major drivers for the upbeat mood. Stocks

– that is arguably Federal Reserve Chair Jerome Powell's greatest achievement in 2021. The bank prepared markets for the reduction in its bond-buying scheme – and investors didn't budge when the Fed announced an acceleration of it. Printing fewer bonds is a pre-cursor to raising rates, and the Fed has been indicating they are coming in 2022.and the hawkish shift addresses rising inflation and a steaming hot economy.

Officials at the world's most powerful central bank could begin laying the ground for an early rate increase as early as next week. The US releases, which could show robust hiring around the holidays and an increase in wage pressures. Higher pay is linked to future inflation.market fall – and they currently have reasons to be cheerful. However, once the festive season concludes, these boosters could backfire.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

 

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