Weekly Analysis: How to respond if volatility picks up next week

Free Weekly Analysis:

It was another decent week for the S&P 500. The index finished 1.3% higher and it continues grinding its way into record territory.

Stocks are trading well despite the political bickering going on in Washington. Our “leadership” is struggling to agree on a stimulus bill and just as important, a funding bill to avoid a very unhelpful government shutdown. That said, this gamesmanship is S.O.P. for how things get done in D.C. and every agreement looks like it is going down in flames moments before it gets passed.

At this point, the market is trading really well. That said, we are quickly approaching the lull between Christmas and New Year’s. Don’t expect much meaningful to happen over the next two weeks because most big money managers have already left for Florida or Aspen. If these institutional investors wanted to make any portfolio adjustments before year-end, they already did it and we should expect stocks to coast into 2021.

While the gap between Christmas and New Year’s should be quiet, things can get a little choppy when retail investors take control. But even if we see volatility pick up next week, ignore it. These impulsive little traders run out of money quickly and any move they trigger stalls and reverses not long after.

Trading opportunities will definitely get more interesting after the calendar rolls over to 2021. Until then, relax and take a moment to stop and enjoy the holidays. It’s been a great year for trading and we should be very thankful to be as fortunate as we are!

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