Two and a half months ago, I was talking to a friend of mine about Wall Street adages. He is also in the investment management business and his son and my son both run cross country for Ponte Vedra High School. There are an insane number of investment adages, and many are complete and opposite wisdoms. The one that caught our combined imagination was “Wall Street climbs a wall of worry.”
At the time, the market was setting a near term low, and things looked bleak for a stock market that had just previously begun to show a slight glimmer of hope. It was memorable, because we both blurted out the adage at the same time. For a brief moment, we bonded on that thought, both thrilled by our shared latent optimism.
At the time, the prevailing wisdom was that the United States would be going into a recession either next quarter or the quarter after or the quarter after that. “Recessions don’t usually announce themselves in advance,” I declared. He nodded in agreement. “They usually come out of nowhere and blindside you on a random Tuesday afternoon.” We both laughed and went back to our volunteer jobs at our home Cross Country meet. The Ponte Vedra meet is named in honor of Craig Speziale. Craig was the first principal at Ponte Vedra and beloved. He died suddenly, and I wanted to take this chance to remember him.
Anyway, back to the recession, the one that has been coming for years now. The one that may never come. The idea that there was a recession out there on the horizon, that we could see it coming, but had not really reacted to it, never made sense to me. The stock market is a forward-looking indicator. In other words, it is predictive and not reactive. If a recession were coming, the stock market and stock prices should be signaling that in advance. And it just wasn’t. Stocks were signaling inflation concerns and institutional uncertainty.
Ever since that random conversation with another investment adviser at running meet, the market has steadily been getting stronger, like a snowball rolling down a mountain into this December’s “Santa Claus Rally.” That rally came out of nowhere and left many scratching their heads and asking each other, “What happened to the recession?”
“Santa Claus Rally” is another Wall Street saying. It refers to a December rally where the market goes up dramatically around the holidays. It does not happen every year, no matter how often we ask. But in years when the economy is good, we often see robust returns in December. The fact that we got one this year suggests there are more positive returns to come.
I do not know what the market is going to do in 2024; no one does. But, if I had to bet, and my choices were between a much-advertised recession and a surprise market rally, I would bet on the rally.
Scott A. Grant is a local author and investor. He is a frequent contributor to the Recorder.
