Santa Claus rally? Much will depend on this week's FOMC meeting

WALL Street has led global equities higher over the past week, mainly because initial tests of the Omicron variant of Covid-19 suggest that it is not as virulent as might have been feared.

This in turn has given rise to hopes of a year-end rise in stocks, sometimes dubbed a "Santa Claus'' rally for the market phenomenon that has occurred in the last week of December through the first 2 trading days in January. Explanations for the causes include tax considerations, a general feeling of optimism and happiness on Wall Street, and the investing of holiday bonuses. Whatever the reasons for the rise in prices - it could also be due to year-end "window-dressing'' by funds, sometimes also known as "the January effect'' - it does not always occur. Still, it has manifested itself often enough for punters to try to capitalise on it.

Investors should note however, that more time is needed to ascertain Omicron's impact and that the International Monetary Fund (IMF) recently said that it expects the variant to dent global confidence which in turn would hurt growth. The IMF also said that even before Omicron's arrival, it was concerned that global recovery was losing momentum because of "frictions'' caused by the Delta variant - namely supply chain issues and uneven vaccine distribution.