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Is a December Rally Likely?—Searching for Alpha for December 2011
It’s hard to believe that stocks were down over 7% at one point last month. But the coordinated central bank intervention on Nov. 30—and on the last day of the month, no less—enabled equities to end the month with only modest losses.
Such attempts to prop up the market can’t go on forever, of course, but they underscore the will of the Western world to avoid a recession at any cost. But it won’t have to, as a December rally is all but assured amidst bullish seasonal factors and the mindset that Europe won’t implode until after the New Year at the earliest.
I mentioned a few reasons to favor stocks heading into year-end in last month’s Searching for Alpha newsletter. These included robust earnings and hedge funds desperate to make some cash, to name a few.
But the most important reason to believe in a Santa Claus rally is simply because we need one—and the central banks of the world can simply will a rally into existence if traders need a nudge.
About the Author
Ben Warwick, Quantitative Equity Strategies
Veteran investment strategist Ben Warwick brings 20 years of investment management expertise to AdvisorOne.com in his blog, Searching for Alpha. His market and economic insights provide readers with an insider’s view on generating alpha through asset allocation, the use of strategic portfolio “tilts” and alternative investments.
Ben Warwick founded Quantitative Equity Strategies (QES) in 2002 as a platform for implementing his quantitative investment strategies. The firm manages assets with traditional long-only equity and fixed income, private equity, managed futures and alternative investment mandates. QES has developed an industry leading expertise in building investment programs that can replicate alternative returns, while offering daily liquidity and transparency. These products include the HFRq, a hedge fund replication strategy developed in concert with Hedge Fund Research in Chicago; the Managed Futures Beta Index, with Aspen Partners; and the Nomura QES Modeled Private Equity Returns Index (PERI), which was developed with Nomura Bank and Preqin, the leading source of information in the private equity industry.
He is the author of several books, including "Searching for Alpha: The Quest for Exceptional Investment Performance," (Wiley, 2000) and "The Handbook of Managed Futures," with Carl Peters, (McGraw-Hill, 1996). He can be reached at ben@qesinvest.com.
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