Does a failed Santa Rally mean a bleak 2019 for ASX shares?
This year’s Santa Rally is being replaced by the “Christmas Grinch Stinge” as the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) is covered in another day of red. The ASX 200 index tumbled 1.2% in late morning trade as fears of a global slowdown from trade wars and a disorderly Brexit have essentially dashed any hope for the seasonal (and up to now reliable) end-of-year market rally. It’s unusual for the most watched ASX benchmark to deliver a loss in December, and not only are we at risk of breaking with tradition this year, but the ASX 200 is poised to suffer its worst December loss since 2002! This assumes its current loss of 2.7% since the start of the month holds for another two weeks.
ASX200 Chart
We can only hope that the US Federal Reserve’s high anticipated rate decision and press conference, which are expected on Wednesday (US time), will deliver some relief or this December will be only the sixth time since 2000 that investors will have to cop a loss.
The bigger question for investors is whether the poor December performance is a harbinger of ill tidings in 2019 for our share market.
There’s some good news on that front. The five years when the ASX 200 posted a loss are 2015, 2014, 2007, 2005 and 2002 – with 2002 being the worst December of the lot as the ASX 200 crashed 6%.
More significantly, a December meltdown doesn’t seem to have much bearing on market returns in the calendar year after.
Only twice out of these five times did the ASX 200 finish in the red in the 12 months following a Grinch Stinge – so we shouldn’t necessarily feel bearish about 2019 at this juncture.
The fact is, the forward-looking economic indicators here and overseas don’t seem to be suggesting anything more sinister than a slowdown in economic growth, and there’s no reason to think the chance of a recession is likely even though global equities seem to be pricing in the chance of one.
If investors come to realise that the sky isn’t falling, we could see some of the most beaten down ASX blue-chip stocks of 2018 make a big comeback in the new year.
Some of these large cap dogs of 2018 include the Origin Energy Ltd (ASX: ORG) share price, Westpac Banking Corp (ASX: WBC) share price, Telstra Corporation Ltd (ASX: TLS) share price and Ramsay Health Care Limited Fully Paid Ord. Shrs (ASX: RHC) share price.
Find out our views on these stocks by clicking on the link below.
