The holiday season is officially here. And with that comes holiday parties. Sweet treats, eggnog, fancy attire and of course that one guy or gal that shows up three-sheets to the wind and begins owning the room with loud talk. All eyes turn to that person and others start to wonder, “What will happen next?” Before you know it, the tipsy talker turns the room topsy-turvy with unleashed dance moves that leave a trail of broken lamps, knocked over wine glasses, and people jumping out of the way.
The scenario above is eerily similar to what happens when the stock market is just cruising along like a quiet holiday party – easy, predictable, fun – and then an “event” occurs – oil-price breakdown, Chinese economic downturn, interest-rate hike –the market is suddenly dancing wildly, solid indicators are getting knocked over, and investors are getting out of the way of the wayward drunk.
What should you do when this happens, when everyone is scrambling to get out of the way of volatility? While there are many ways to overcome market volatility, the smartest thing to do is get out of the way, so you can get back in when the wild dancing stops.
This holiday season could be a market opportunity after the volatility finishes crashing around. Going into the last of 2016, one big “event” coming our way is the Fed’s likeliness to raise rates. Given the history of, the attitude about, and the fear around the Fed raising rates, if it does raise rates (likely more than not), the volatility could start soon and continue for a while. And the market is especially over extended right now.
When Federal Reserve officials meet next week, agreeing to raise short-term interest rates will be the easy part. The trickier task could be debating the likely path of interest rates in the months and years ahead.
The market does not like what it does not know. Last December, when the Fed raised rates, the “when will they do it again” scenario began to play out in January. For about a month, the market danced wildly, but on February 11th, it started to climb, and it climbed higher right through April 20th.
A holiday tip? When the tipsy person starts wildly dancing, step out of the way, and when he or she runs out of steam, step back onto the floor and start having some fun. The trick is to know when the craziness is over and rationality begins again. That is where VantagePoint comes into play.
Watch the video below to see how VantagePoint performed against the Fed’s announcement in October 2015.
Don’t let market volatility spoil your season. Sign up today to receive a free market forecast from VantagePoint and ring in the new year with some profitable trades.