Preparing the defences
For 2023, investors need to develop a clearer picture of inflationary drivers like oil, and the value of traditional defensive positions like gold
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CHRISTMAS is a time of extremes for financial markets. It is either exuberant enthusiasm that drives a market to new highs, or looming pessimism that drags a market down. The reason behind these extremes may be the festive period.
Trading desks are staffed by those unlucky enough to be denied Christmas holidays. The institutional trading desks are in holiday mode, and like all their counterparties, lightly staffed. The result is low volumes of trading, and this means that even small moves are magnified. This may lead to an exaggerated picture of the market and its intentions. This picture is corrected when vacationing traders return to their desks and normal volumes resume.
Investors need to discount these festive season extremes. For 2023, investors need to develop a clearer picture of inflationary drivers like oil, and the value of traditional defensive positions like gold. Putting the extremes of festive activity to one side, 2023 looks like bear territory.
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