Will there be Santa Claus Rally?

Will there be a Santa Claus Rally before this year comes to an end and the Straits Times Index (STI) stays above water compared to the beginning of this year?

The STI is currently at 3,052 points, below 3,167 at the start of the year.

Let me look at history of STI from years 1995 to current date. The table shows the beginning and ending values of STI over these years.

Year

Beginning

Ending

Change

Remarks

2013

3167

??

??

Fed taper threat

2012

2646

3167

19.7%

2011

3190

2646

-17.1%

Eurozone crisis

2010

2897

3190

10.1%

2009

1761

2897

64.5%

2008

3482

1761

-49.4%

Global financial crisis

2007

2985

3482

16.6%

2006

2347

2985

27.2%

2005

2066

2347

13.6%

2004

1764

2066

17.1%

2003

1341

1764

31.5%

2002

1623

1341

-17.4%

2001

1926

1623

-15.7%

Sep 11 attack on US

2000

2479

1926

-22.3%

Dot-com bubble burst

1999

1392

2479

78.1%

1998

1529

1392

-9.0%

1997

2216

1529

-31.0%

Asian Financial crisis

1996

2266

2216

-2.2%

1995

2239

2266

1.2%

Of total 18 years tracked, 8 years out of 18 went into negative. Out of these 8 years, the reasons for some years were due to known crisis in that year. For most years, the STI rallied to end well above the level set at the beginning of that year.

So what about 2013? For one, economy of US is growing again. Japan and Europe are positive in their economic outlook. China is addressing their economic problems through structural reforms. Middle East is relatively stable politically. The big issue is the potential withdrawal of cheap money from US central bank (Fed). That can derail any upside to STI.

Then again who can gaze at the crystal ball and predict the outcome with certainty? Your guess is good as mine.

Copyright © 2013, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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