It’s the first of January and the markets open tomorrow after a lot of disruption to trading sessions in markets across the world. In total, most of the world has observed 3 bank holidays in the space of just seven days. These three bank holidays, Christmas Day, Boxing Day and New Years Day ground the world to a halt every year. Not to mention the vacation days associated with having a festive time and joining weekends and bank holidays. A distracted work-force can send a ripple effect across the world. But what does all this mean to traders like me and you? Let’s review how holidays affect financial markets.
Wide Spreads and Low Liquidity
We all know how wide spreads can get when the markets open after the weekend, but this is no ordinary weekend. Businesses across the world, especially those in the retail and e-commerce sectors have been working flat-out throughout December. Many retailers will have banked the most cash in the final days of the month with thanks to last-minute shoppers. In this day and age, many businesses trade across borders and sell goods internationally. These companies will want to close their foreign currency risks, especially for minor and exotic currencies, thus protecting their hard work over this intense period. This means there will be more competition in the markets once they reopen in just a few hours. Are your Stop Losses safe? Expect big gaps and low volume in the order books.
Some Stocks and Indices Set to Bounce
The fourth quarter is certainly the most important time of the year for retailers. Thanksgiving, Black Friday, Christmas present shopping and New Years Eve party preparations all inspire a spending frenzy. As companies release their earnings reports, they will either exceed or fail to meet the expectation of investors. Amazon, for example, has been in a slump throughout 2018, will a positive earnings report trigger an uptrend? It all depends on how positive that report is. The same goes for the rest of the big players in making Christmas happen. Supermarkets, department stores, airlines and postal companies. If everyone had an extravagant Christmas in 2018 we can expect that affect the US, European and Australian Indices. Don’t forget where our Samsung Tablets, Kindles and iPads really come from (it’s not Paulo Alto).
New Years Resolutions
Everyone starts the new year focused and determined to make this one better than the last. It’s the start of a new tax year and most individuals and firms will have sold off the investments in their portfolio which were not performing. This allows them to claim capital losses and offset against their tax bill. Many people and firms are idle in December and pause new projects and investments for the new year. It’s also a new period and firms have new budgets and fresh capital to invest. Traders who got burnt last year may give it another shot and see what prosperity the new year will bring to them.
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