3 Things You Need to Know This Week | Santa Rally, Fed Meeting, Year-End Planning

Transcript

Paige Tyson:

Hello, and welcome to 3 Things You Need to Know This Week—our regular series designed to help you sift through the noise across financial media and understand what really matters for markets. To stay up-to-date with our latest market insights, subscribe to our YouTube channel or visit Fisherinvestments.com. And with that, here are 3 things you need to know this week.

First, let’s talk about the “Santa Claus Rally.”

December has arrived, and with it, familiar chatter about the "Santa Claus Rally." This term—first coined in the 1970s—has long charmed investors with the idea that stocks tend to climb during the final weeks of December and into the New Year. While that all sounds quite festive, the truth is far less magical. Historical data show the Santa Claus Rally—like many other market myths—stems from chance historical patterns and is not rooted in market fundamentals. Sometimes stocks rise during this period, and sometimes they don’t. There’s a reason you’ve probably heard the truism that past performance doesn’t predict future returns. The good news is that historically, stocks rise more often than they fall, regardless of the season. Though seasonal investing myths occasionally seem to hold true, they often work just frequently enough to create the illusion of a reliable trend. For long-term investors, we have long said that it’s time in the market that matters most, not timing the market.

Next, the US Federal Reserve’s final meeting of the year.

This week, the US Federal Reserve will hold its eighth and final monetary policy meeting of the year. During the meeting, members will decide whether to cut the federal funds rate—currently set at 3.75 to 4 percent. They will also share updated projections for inflation, GDP and interest rates. Investors will be watching closely to see if the Fed delivers a third consecutive 25-basis-point cut and to gain insights into the potential direction of monetary policy in the year ahead. While Fed decisions often dominate headlines, we want to remind investors that monetary policy is just one of many factors influencing markets. Rate cuts may grab attention, but they aren’t make-or-break for stocks. Additionally, we believe speculation about who might replace Jerome Powell as Fed chair when his term ends in May 2026 is premature—as is what a change could mean for monetary policy. While the Fed Chair is influential and sets the agenda, they’re not the sole decision-maker. Monetary policy decisions are made collectively by the 12-member Federal Open Market Committee. Whoever steps into the role will be just one voice among many.

Finally, year-end financial planning.

December is when many begin looking ahead to next year’s major life events. From weddings and home renovations to other big-ticket expenses, year-end is the perfect time to review your budget for the year ahead. If you’re planning for a major expense, keeping the funds in cash may be prudent. This ensures it’s readily available and insulated from the short-term market swings that can happen at any time, such as pullbacks and corrections. While you’ll want to prepare for planned expenses, it’s also important to ensure that unexpected challenges don’t derail your financial plans. That’s why maintaining 6 to 12 months’ worth of cash needed to cover your fixed expenses can be a smart move. If anything disrupts your income, this “emergency fund” can help you cover expenses without being forced to sell investments during periods of short-term volatility. And that’s it for this episode of 3 Things You Need to Know This Week! For more of our thoughts on markets, check out This Week in Review released every Friday. You can also visit fisherinvestments.com. Thanks for tuning in, happy holidays, and don’t forget to hit like and subscribe.