As the calendar turns from November to December, Wall Street is a scene of high risk and potential market downside. According to financial experts, the market outlook for December is grim.
There are several factors contributing to the high risk of market downside in December. Perhaps the biggest factor is the looming presidential election and its potential impact on the economy. With the political rhetoric from various campaigns focused heavily on economic policy, investors are on edge and waiting to see what will happen when all the votes are counted.
This heightened political uncertainty has had investors wondering whether or not they should move to safer investments in the event of a major shock in the markets. This has led to increased volatility, and with it, the risk of a market downside.
Also, after a strong November performance, it has become increasingly clear that the markets are definitely not headed in a consistent direction. The diverging paths of some major US indices, such as the S&P 500 and Nasdaq, has added to the uncertainty, and as a result, investors are not sure of which way the markets are going to go.
Finally, the Fed’s monetary policy also plays a large role in adding to the risk of market downside in December. As the US economy continues to grow, the possibility of an interest rate hike is ever present, and with it, a sudden drop in the stock market.
While the market outlook for December is bleak, savvy investors should be prepared for recessions by diversifying their investment portfolios. By incorporating stocks, bonds, currencies, and commodities into their portfolios, investors can reduce the risk of significant losses should a major market crash occur. By properly positioning themselves for the long-term, investors can help to avoid the market downside that is so often associated with December.