Stocks are falling significantly this year, even indices that saw a slight rally in the last month. It is worth noting that there has been a split of the trend. While the DJIA increased, the Nasdaq held steady. In Europe, indices don’t concentrate in certain sectors like they do in the US, but a similar trend has emerged when considering certain types of firms.
The Dow Jones consists mostly of lower valuation, so called “value stocks”, which have been outperforming. Even during periods of recovery, tech stocks continue to perform poorly. Their high valuations make them more speculative. The Fed’s tightening contributes to reducing interest in higher valuation stocks, and now the Fed is expected to slow its rate hikes. This could indicate which stocks and sectors could most benefit from a Santa Rally.
What are the odds of this happening?
We need to be able to predict whether there will be a rally in the future. Which is a bit of a problem, because there isn’t much agreement on the causes of the rally. Not only that, but there also isn’t even an…