It looks like Santa Claus may be making his traditional end of the year ride around the world in his magical sleigh. Gifts have been bought and wrapped, and it seems all the preparations have been made. But while the pages on the calendar are quickly turning, the big question for many investors is what should they watch following the holiday season?
For starters, everyone needs to take a close look at the U.S. Federal Reserve (FED). While the US central bank has kept interest rates near historic lows throughout 2020, there’s still a chance of further reductions in the near term. If that were to occur, it could boost consumer spending and help to trigger an acceleration in economic growth, both of which are important components of any bull market.
Adjacent to the FED is the bond market. Following Santa’s hashtag flight, investors will likely be biased toward high quality government bonds as their prices could rise in an environment of deflationary pressures. As the yields on interest bearing investments decrease, the prices on fixed income investments tend to rise, making bonds an appealing option for many investors.
To round out the picture, investors wishing to finish the year on a strong note should also take into account the potential for an increase in the price of gold, which traditionally operates as a store of wealth during times of increased economic uncertainty.
Needless to say, the end of 2020 will be a pivotal time for investors. Santa may be around the corner, but the bond market, the FED, and gold could all provide sunny skies for market participants. Keep your eyes open and take the opportunities!
Santa’s Sled Ain’t the Only Thing Heating Up: Watch Fed Policy and Bond Market Activity!
