Will we have a Santa Claus rally?

With the recent pullback in the stock market over the past couple of weeks, there are questions hanging over the market as to whether the seasonally strong period in the stock market will be broken this year. In previous years, the market has been inclined to trend upwards during the November and December period. There are several psychological as well as mathematical reasons for this seasonal factor.

Investors begin to focus on the upcoming holiday and shopping season. As often is the case leading into Christmas, consumers shop more for friends, families and themselves. There is a natural uplift in sentiment as well as spending due to the closing of the year. This psychological effect generally feeds into the stock market.

The early numbers appear to demonstrate that consumers both locally and abroad are still spending for the Christmas and holiday season. While it is a good start that may lift sentiment in the short-term, investors remain cautious with the ongoing problems in Europe. Money is still staying on the sidelines afraid to be invested into the market, even when valuations are reasonable and company fundamentals have improved.

While we can be hopeful for a few good weeks in the stock market leading up to Christmas, could the European sovereign debt crisis make this year one of the very few years where Santa Claus decides to stay home? Only time will tell.

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Australia – The wealthy country

Australia is well-known as the “lucky country.” Now we can also add the title – the “wealthy country.”

With the resource boom of the last decade, a strong currency and not having experienced the economic and housing turbulence that has rocked countries like the United States of America and many parts of Europe, Australia has been catapulted to the top ranks in terms of median wealth, at around US$222,000 according to a recent Credit Suisse research report.

Our love for real estate was a noticeable but somewhat expected large composition of this wealth. Having a dominant middle class, we were also not surprised to read that very few Australians had net worth less than US$1,000, compared to the rest of the world.

Despite having only 0.4% of the world’s adult population, we believe what really sets us apart is that with 1,861,000 people in the global top 1%, Australia accounts for 4.1% of the members of this wealthy group.

After a difficult financial market over the past few months, it is great to read some good news. While maintaining this top spot will need continuous hard work, we can at least give each other a pat on the back at our next BBQ.