Last Friday, the Dow fell 315.51 points (or 1.8%), weighed down by several factors such as slumping oil prices, weakening industrial production in China, the tumbling Rouble and the accompanying gloom in Russia.
But the last two days, as we head towards the final weekend before Christmas, markets worldwide have kicked off the Santa Rally with a stunning rebound, with the Dow surging 288 points on Wednesday and 421 points yesterday.
The world’s economic woes that the media were talking about without a break suddenly got pushed to the backburner, thanks to Fed’s dovish monetary policy with indications that there will be no interest rate hikes at least until April 2015.
This is an affirmation that credit will remain cheap as it stands now.
A Corbis image downloaded from http://www.corbisimages.com
I dare not attempt to analyse what has changed. Suffice it to say that I have seen none.
But is the market spike sustainable and will the traditional Santa Rally as we wind up 2014 continue with the anticipated window dressing from institutions? Will 2015 see a bull run with a market-friendly Fed?
All that will depend on which way manipulators will want the market to swing irrespective of the fundamentals of the economy.
As for me, having missed the Dow’s biggest two-day rally in over three years, I will just sit back and watch to avoid jumping in late and getting burnt. Time to see if Santa is Coming to Town – https://www.youtube.com/watch?v=TjNMnlvYHLo.
G Joslin Vethakumar