Historically, the week before Christmas is calm with little in the way of volatility for the Big Four, stocks, bonds, currencies and commodities. But the week of Christmas 2018 was more volatile than anything seen in history.
My column this week is about what unfolded back then. And back then my weekly column was entitled “‘Twas the Week Before Christmas.”
And to jog your memory, here is what I penned three years ago: “‘Twas the week before Christmas, ‘n not a bull was left standin’ ‘cause stocks ‘n commodities both collapsed into a hard landin’.
“The week before Christmas 2018 was the worst for the Dow Jones in 10 years. But the entire month of December 2018 was the worst for the Dow Jones in 85 years, going back to 1931.
“The stock market just booked its ugliest Christmas Eve plunge — ever. The Dow Jones Industrial Average marked its most severe drop ever on Christmas Eve, finishing 710 points lower.
“Prior to this week, the worst the Dow ever performed the trading day before Christmas was Dec. 23, 1933, when it fell 0.84% to settle at 98.04 compared to this year’s settlement of 21,700.
“Obviously, compared to 1933, the Dow appears pricey. But both trading sessions were brutally bearish.
“Commodities, per se, as measured by the CRB Index fell to a 20-month low on Christmas Eve. So did the Dow Jones.
“Crude oil prices fell 11% in the week before Christmas in 2018. From October, crude oil prices dropped 40%.
“A $10,000 investment in bitcoin in December 2017 would be worth $3,200 just before Christmas Eve 2018
“Peter Schiff, chief executive of Euro Pacific Capital, a longtime market pundit said, ‘We’re in a house of cards that the Fed built.’
“Parts of the U.S. government shutdown early the week before Christmas as Congress missed a deadline to pass spending bills.
“Forget the Santa rally, the stock market is fending off one of its worst Decembers in recent memory, and now the Nasdaq has finished in a bear market. It’s a scenario that may unofficially commence the end of the longest equity market bull run, by some measures, in history.
“Apple just entered a death cross, and Wall Street should ‘prepare for the worst.’ After hitting records in October, the stock has slumped 33% in one of the worst performances on the Dow.
“A death cross is formed when a stock’s 50-day moving average crosses below its 200-day moving average. The bearish technical move implies the rapid deterioration of a stock’s upward momentum.
“But everything above was written before Christmas 2018. Christmas Eve of 2018 was the most bearish in history as the Dow fell 710 points. But the day after Christmas, it was the most bullish in history as the Dow rallied nearly 1,200 points and the CRB Index was also sharply higher.”
To repeat: Christmas Eve 2018 was the most bearish day in history for the Dow as it fell 710 points. The day after Christmas 2018 was the most bullish in history as the Dow rallied nearly 1,200 points and the CRB Index was also sharply higher. It does not get more volatile as it did both sides of Christmas Day 2018.
Of course, after the week of Christmas 2018, stocks, commodities and bitcoin headed higher to sharply higher into December 2021. The pronounced weakness the week of Christmas 2018 was short-lived and quickly forgotten over the following three years. But it was not forgotten by yours truly.
In the new year ahead, the outstanding feature for all markets, stocks, bonds, currencies and commodities will be volatility and capricious price swings similar to what unfolded the week of Christmas 2018.
The coming new year is going to be wild and crazy for markets of all stripes. Be prepared.
My column this week was simply to remind everyone how bearish stocks and commodities were the week before Christmas 2018. This week’s column was about remembering the Ghost of Christmas Past.