NEW YORK, Dec 25 — Bruised investors are hoping a so-called Santa Claus rally can soften the pain of a tough year in US stocks and potentially brighten the outlook for 2023.
Friday is this year's start date for this rally named after Santa Claus - if it happens. It will only be clear around the second trading day of 2023. "When Santa Claus doesn't arrive that typically means that there's something in the market that is causing confusion or an obstacle that it is facing. Negative sentiment doesn't change because it's a new year," said Keith Lerner, co-chief investment officer at Truist Advisory Services.
This December is shaping up to be one of the exceptions. Investors shed stocks at the highest weekly rate ever in the week to Wednesday, selling a net US$41.9 billion, according to a BofA Global Research report on Friday. It attributed the sell-off to"tax loss harvesting," a strategy that involves selling assets at a loss to offset capital gains taxes.
Much of the market's trajectory will be dictated by whether inflation can continue to subside and allow the Fed to stop raising interest rates sooner than it has projected.