The Santa Claus Rally’s Here. Why Advisors Are Channeling Their Inner Scrooge

Santa’s sleigh may be packed, but the elves in the air traffic control tower are calling for turbulence.

The so-called Santa Claus rally begins tomorrow and has been linked to a surge in stock prices during the last five trading days of December and the first two in January. For investors, it has literally been the gift that keeps on giving. Since 1969, the S&P 500 gained an average of 1.2% during this seven-day window, according to Forbes. But, many financial advisors are channeling vibes more akin to Ebenezer Scrooge than Buddy the Elf. More than 4 in 10 advisors expect a less healthy economy on the horizon, the highest reading all year, according to the latest WMIQ Advisor Sentiment Index. Bah, humbug!

You Sit on a Throne of Lies

Following a peak in optimism in June, advisor sentiment regarding the US economy has trended steadily downward, and dropped for a fifth consecutive month, according to the data. The Mag 7 is taking most of the blame, with advisors saying sky-high valuations and a market over-concentration in Big Tech are setting the stage for a massive market hangover in the new year. (Some even used the “B-word.”) 

The report also found:

• Advisors with a positive economic outlook hit a high of 63% in April, but have since plummeted to their lowest levels in twelve months.
• The 42% of advisors who expect the economy to be less healthy by the end of next year doubled from 21% in June.

Ho, Ho, Hold on a Sec. To be fair, the holiday spirit hasn’t dried up completely. There were still 44% of advisors who expect the economy to improve, and another significant portion who were just meh. Current advisor economic sentiment is very neutral, sitting at a reading of 101, where 100 represents the median between a positive outlook and a negative one. However, that gauge slipped 5% last month and is down 16% compared to this time last year.

It seems what financial advisors really want for Christmas is a little market diversification.