The last trading week of 2022 is shorter as the European and U.S. markets are closed on Monday. But it may be the most exciting time to speculate, as the Santa Claus rally is still valid until the end of the year. Closing positions any time of year may offer tax benefits. What to Trade Over the Last Days of 2022? Check out this week’s recommended options.
S&P 500
The propensity for the stock market to rise immediately before or after Christmas is known as the “Santa Claus rally.” December has been a strong month for American stocks, with the S&P 500 typically recording an average gain of 1%. Moreover, in the last five trading days of December and the first two of January, the S&P 500 has risen by an average of 1.3%. Despite the current market downturn, these figures suggest December could still be profitable for investors.
The tendency of equities to rise at the end of the year has no definite cause. Still, a few theories suggest it could be due to seasonal cheer, Christmas spending, and institutional investors settling their accounts. Let’s see how it goes this time.
Bitcoin
BTCUSD has been very quiet recently, but this may change in the last week of 2022. The end of the year is often when market participants close their positions for tax purposes. In the case of bitcoin, this can lead to increased volatility as traders look to sell their holdings to realize any capital gains or losses for tax reporting purposes.
When many traders sell their bitcoin simultaneously, it can create downward pressure on the price, leading to increased volatility. Similarly, traders buying bitcoin to offset capital losses can create upward pressure on the price, resulting in increased volatility.
Microsoft
Still considered one of the leading growth stocks for 2023, Microsoft has shown bullish technical signals recently, despite going down by roughly 10% over the last two weeks. MS may answer the question of what to trade over the last days of 2022.
The weekly technical chart of the MSFT predicts a significant upward trend from now on. The asset price is trading close to $238.73 and has increased by 0.3% on the daily chart.
Near $250, there is a visible upward trend for Microsoft (MSFT) stocks. This trend may stop at around $200, as the 50 and 100 daily moving averages are traded below that level. A favorable crossing might cause the price to reach a new high.
Why ride the potential Santa Claus rally this week?
- Historical precedent: The Santa Claus rally is a phenomenon that has been observed in financial markets for decades, with stock markets often experiencing a period of solid performance in the last week of the year and the first two trading days of the new year.
- End-of-year optimism: The end of the year is often a time of optimism and good cheer, which can translate into positive sentiment in financial markets. Traders may want to take advantage of this positive sentiment by riding the Santa Claus rally.
- Portfolio rebalancing: The end of the year is when many investors and traders review their portfolios and make adjustments for the coming year, leading to increased market activity and trading opportunities.
Important Data Releases This Week:
- Tuesday – Home Prices Data.
- Wednesday – the National Association of Realtors (NAR) will issue pending home sales figures for November.
- Wednesday – the Institute for Supply Management (ISM) will announce its most recent Chicago PMI U.S. Markets Closed for Holiday.
- Saturday – China will release the NBS Manufacturing PMI (DEC).
On Wednesday, the National Association of Realtors (NAR) will publish information on pending home sales in November. Sales are expected to have decreased nearly 30% from a year ago, or 0.5%, in November. Due to low inventory, rising mortgage rates, deteriorating affordability, and expanding supply, pending house sales have decreased for 11 of the last 12 months.
The Chicago Purchasing Managers’ Index (PMI), which tracks manufacturing activity in the Midwest, will be released by the Institute for Supply Management (ISM) on Friday. After plummeting to 37.2 points in November from 45.2 points in October, the Chicago PMI probably fell worse in December. The economic slowdown has hurt the U.S. manufacturing sector, and last month’s PMI score was the lowest since June 2020.
What to Trade Over the Last Days of 2022? Mind the Fiscal Quarter
It’s worth noting that the end of the year is not the only time when market participants may close out their positions for tax purposes. It can also happen at the end of a fiscal quarter or when an individual’s tax situation changes. Because of the requirement to report annual capital gains or losses, trading activity is often particularly active at the end of the year.
