Are We Seeing A Muted Santa Rally This Year?

Santa Rally

The seasonal Santa Rally has helped the markets to go above the 5600 levels in Australia but is the market in full swing with Christmas and New Year approaching, is yet to be seen. Under the current scenario, it may not be wrong to say that 2018’s Santa rally is not in line with previous years’ rallies which may be attributed to the decline in the consumer spend as the continued growth is now facing a challenge in Australia.

The low spend directly impact the retailers as people usually go shopping during the Christmas and New Year time and that is when the retailers earn their profit margins. With Amazon entering the market the retailers were already worried about their business in the market. The low wage growth this year has also contributed towards the decline in the retail segment. Adding to the woes was the royal banking commission affecting the lending in the housing market which already had a negative outlook and the downturn in prices led the banks to suffer delaying the rally further.

The ASX had traded almost at a two-year low, and the signs are that the house prices by 2019 will also move backward. While the Brexit turmoil does give a bargain price to the investors, but the overall markets from equities, bonds to currency are all closing in the red week after week. Another area taking a hit was the technology sector after a major sell-off in the US had investors worrying on the domestic front as well.

Usually, the markets end the year with a noticeable difference like in 2017 the S&P/ASX 200 surged as much as 1.5 percent while the markets were rallying in 2016 to close 4.4 percent higher. This December, however, due to the interest rate hike by the Federal Reserve and the trade dispute uncertainty has pushed the markets from rallying. The bond yields are lower in the long term as compared to that of short-term. Also, diminishing imports from China has left the account balances low which in turn leaves lesser wealth for the economy.

With weak Australian dollar currently above 72 US cents, the ASX is poised to edge lower. The only hope now remains as the trade war settles down, is the push needed from big miners and banks. The ASX traded low at around 5600 and all ordinaries at 5675. The stocks that have seen most of the losses during the week are Nine Entertainment (ASX: NEC), Afterpay Touch (ASX: APT), TPG Telecom (ASX: TPM) and Domino Pizza Enterprise (ASX: DMP).


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