Steep Declines After FOMC: Is Santa Rally Over?

Tiger_comments
12-19 20:23
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Ahead of this FOMC meeting, a 25bps rate cut is almost a certainty. The market’s focus is on the Fed’s outlook for 2025.

Compared to September’s FOMC outlook, the Fed has reduced its expected number of rate cuts, primarily due to concerns about an overheating economy. Instead of the previously projected four rate cuts in 2025, this has now been reduced to two.

The latest projections show:

  • An upward revision in 2025 GDP growth expectations,

  • A lower unemployment rate forecast,

  • Higher inflation expectations.

Unless we see a slowdown in inflation and employment, the earliest rate cut will likely be in March, and even that isn’t guaranteed if inflation and employment fail to cool off.

1. Why Did This Long-Awaited Hawkish Stance Lead to Such a Steep Market Drop?

The market has been overly optimistic since Trump’s election. The rally has primarily been driven by a handful of companies like $Tesla Motors(TSLA)$, $Broadcom(AVGO)$ , $Apple(AAPL)$ , $Alphabet(GOOG)$ and $Meta Platforms, Inc.(META)$ . Market breadth remains extremely poor, which is a signal of the late stages of a bull market.

The correction and the market’s anticipation of hawkish Fed commentary have been ongoing for some time. So even though this meeting unfolded as expected, the market still took the opportunity for a significant pullback.

It’s likely that the Santa Rally has already ended.

2. Buy the Dip or Sell the Top?

Some believe that this correction is healthy, as US economy has yet to show any substantial problems. There’s no urgent need for massive sell-offs.

However, for those who’ve already made substantial profits, selling now could be a wise choice. Analysts warn that the Shiller PE ratio has reached historic highs, meaning the risk-reward ratio for holding onto positions is now relatively low.

Trump’s administration introduces a high degree of uncertainty. Whether to take on higher risk depends on individual preferences.

What would you choose?

Is santa rally over or not?

Would you buy the dip or sell the top?

Leave your comments and also post to win tiger coins~

Star Stocks Plunge: Is Triple Witching a Buying Opportunity?
Recently surging Trump-related stocks have all plummeted. This Friday's US "Triple Witching Day" could be the largest ever, with over $6 trillion in options set to expire. Despite recent Fed-driven sell-offs, call options still outnumber puts, though the gap has narrowed in the past 24 hours. ------------------------- Which star stock is worth buying the dip? What’s your target entry price?
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Comments

  • Shyon
    12-20 00:01
    Shyon
    I believe it's completely normal and healthy for the market to experience a pullback and correction after several weeks of a rally. The market can't keep climbing indefinitely without taking a breather. These corrections are actually necessary for long-term stability, allowing the market to reset and prepare for the next phase of growth. The rally we've seen was strong, and it’s only natural that we would see some consolidation after such a run-up. This isn't the end; rather, it’s just a temporary pause as we prepare for the next potential rally in the future.

    As for the Christmas rally, I believe it has already run its course for 2024. The rally kicked off earlier this year, and while it had a strong start, it seems that we’ve already seen the peak for this period. The combination of hawkish Fed expectations, rising inflation concerns, and the high Shiller PE ratio suggest that we're entering a phase where upside potential is more limited in short term.
    @Tiger_comments @TigerStars

  • MHh
    12-19 22:51
    MHh
    I would prefer to sell the top now because the benefit to risk ratio is low already. Preserve cash to buy the dip at a later time. I don’t think Santa rally is over yet, there is still room for stocks to climb till trump is officially in and there will a be a short period of euphoria after too. So maybe late Jan or early Feb the dip would appear along with the Fed’s repeated announcements of potentially reduced rate cuts if inflation remains sticky.
  • icycrystal
    12-20 02:11
    icycrystal

    either way, no matter how many cuts... market will always swing... there's always the ups and the downs... I guess one way is to stick to good stable companies with good fundamentals... hold on to them for long term... and buy them at good price... investment is a marathon some say... indeed...

    Ahead of this FOMC meeting, a 25bps rate cut is almost a certainty. The market’s focus is on the Fed’s outlook for 2025.

    Compared to September’s FOMC outlook, the Fed has reduced its expected number of rate cuts, primarily due to concerns about an overheating economy. Instead of the previously projected four rate cuts in 2025, this has now been reduced to two.

    @GoodLife99 @Aqa @koolgal @LMSunshine @Universe宇宙 @Shyon @rL @HelenJanet @SPACE ROCKET @TigerGPT

    What would you choose?


    Is santa rally over or not?


    Would you buy the dip or sell the top?


    Leave your comments and also post to win tiger coins~

    • TigerGPT: 

      As an AI financial analyst, I am here to provide you with some insights and considerations regarding your questions.

      Investment Strategy: It is generally advisable to stick to good stable companies with solid fundamentals for long-term investments. These companies tend to perform well over time and offer more stability during market swings. However, it's important to conduct thorough research and analysis before making any investment decisions.

        

      Individual Preferences: The decision to take on higher risk depends on your individual risk tolerance, investment objectives, and financial situation. It is essential to assess your ability to withstand potential losses and your investment goals before deciding to take on higher risk investments. Diversification across different asset classes and risk levels is often recommended to manage risk effectively.

        

      Santa Rally: The Santa Rally refers to a phenomenon where stock markets generally experience a positive trend during the holiday season. While there have been historical instances of the Santa Rally, it is important to note that past performance does not guarantee future results.

        

      Buying the Dip or Selling the Top: Timing the market is a challenging task, and it is difficult to consistently predict market tops and bottoms. It is generally considered more prudent to focus on long-term investment strategies rather than attempting to time the market. Dollar-cost averaging and regular investments can help mitigate the impact of short-term market fluctuations.

        

      It is always recommended to consult with a licensed financial advisor or conduct thorough research before making any investment decisions. Remember that investing involves risks, and outcomes may vary based on various factors.

  • Aqa
    12-19 21:41
    Aqa
    Some of us are having sleep declines with the steep market drop after FOMC. 25bps rate cut is now a reality. Gold price crashed and the stock markets reacted with a steep drop. We want to Buy the Dip but the dip is not deep enough to warrant action! The market breadth remains extremely poor, a signal of the late stages of a bull market which means the Santa rally might be over. With the high degree of uncertainty brought about by Donald Trump’s coming administration, we must be more cautious in our investments. Always exercise due diligence before each trade.🍀
  • NightMorph
    12-20 06:04
    NightMorph
    There is no Santa rally. The nasdaq has been flat for December,  dow jones  crashing hard. I'm hoping for a new year's miracle. But that's when president Musk gets inaugurated. The NOV rally was the last great month until next year.
  • ECLC
    12-20 02:32
    ECLC
    Expected market plunge and will buy the dip with spare fund. Think any correction is healthy after rally and present buy opportunity.. mindful to be selective and cautious.
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