The "Santa Rally" Is Just Thin Ice

 It's that time of the year again. In the background, we hear monsoon rain and thunder here in Singapore. In the background, we also hear the narrative of the "Santa Rally" from our financial news channels.

Open any investing app right now, and you will see the headlines. "End-of-Year Surge!" "Catch the Wave!" It sounds like a real gift from Santa. Does the market sentiment suddenly shift to euphoria just because it is late December?

Ask anyone with a clue and they can tell you there is no such thing as magic. The year-end rally is just a temporary mechanic.

Echo Chamber of Empty Desks

Walk into any workplace now and it is a ghost town. The senior portfolio managers—the ones who move billions—cleared out days ago. They are skiing in the Alps or sitting on a beach in Bali.

Who is left? The junior traders. The algorithms. And the retail investors reading headlines.

When the big players leave, liquidity dries up. The "order book" (the list of buyers and sellers) gets thin. When volume is low, it takes very little capital to push a stock price up. A small buy that wouldn't even register in October can cause a 1% jump in late December.

It’s not a rally. It’s drift.

Beware of Window Dressing

There is another cynical mechanic at play. Fund managers want their year-end reports to look good. They often buy the year's winning stocks right at the finish line so they can show their clients: "Look, we own the winners." 

This artificial buying pressure pushes prices up, but it has nothing to do with the fundamental value of the company.

My Protocol

So, what do we do with our Dividend Portfolio during this "rally"?

Absolutely nothing. We can look and shout Huat as prices trend upwards.

We do not chase green candles built on thin volume. We must remain cautious of buying at inflated prices that will correct itself the moment the "adults" come back to work in the second week of January. 

Lastly, we must stay the course of whatever investing system or mandate we have. I will stick to my guns of buying at prices I am comfortable at. I have purchased shares in CapitalandInvest this month, and may soon purchase shares in DBS and Great Eastern. 

Disclaimer: This article represents my personal views and portfolio actions. It is not financial advice. Please do your own due diligence before investing. 

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