Could we still have a Santa Claus rally through the year-end?

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Written on Dec 20, 2022

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Stephanie Link is not giving up on hopes of a Santa Claus rally.
Josh Brown says it's rare for markets to see two down years in a row.
S&P 500 is currently down about 20% versus the start of the year.

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S&P 500 has been a down and down again story in recent days but Hightower’s Stephanie Link is not giving up on hopes of a Santa Claus rally through the end of 2022.

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S&P 500 could rally in the coming days

On Tuesday, the Bank of Japan surprised global markets as it adjusted its yield curve control policy (read more).

Link agrees that interest rates will remain higher for longer but is not entirely dovish since the U.S. economy is keeping incredibly resilient. On CNBC’s “Halftime Report”, she said:

I think we’re in a better shape than is being portrayed. A lot of bad news is factored in. So, I think we can rally into the end of the year. We’ll probably trade around for a while in Q1 but it’s not all doom and gloom.

For the year, the benchmark index is currently down about 20%.

What to expect from U.S. stocks in 2023?

Building on what she said, Josh Brown – the Chief Executive of Ritholtz Wealth Management quoted historical data and said it wasn’t very likely that 2023 will be another down year.

21 down years for the market, in 18 of them, the following year was positive. What happened to the other three? Pretty extraordinarily bad recessions.

But that doesn’t suggest the market will shoot up either, he added. Brown continues to recommend caution as the coming year could still be a difficult one.

He, therefore, recommends betting on “secular growth stories” with select names in the solar, healthcare, and energy sector.