The year may be winding down as we head towards December, but things seem to be heating up in the markets. Global equities and bonds have rallied over the past two weeks as investors price in the end of the central bank interest rate hiking cycle, particularly in the US. Can the cheer last all the way to Christmas, or is a market Grinch lurking somewhere? After all, it has mostly been a disappointing year as far as investment returns go.
A good place to start is to ask where the sudden optimism comes from. Markets had been under pressure since July, so a rebound was always likely. There are always rallies in bear markets and drawdowns in bull markets. ADVERTISEMENT CONTINUE READING BELOW Things never move in a straight line, which is one reason why timing the market is so difficult. Therefore, November may be a good month so far, but it tells us very little about what lies ahead. We need to think about whether the fundamental picture has change