This weekend I was reading The Art of Thinking Clearly by Rolf Dobelli. The book has a chapter called “The Halo Effect” – and references the company Cisco (CSCO) during the late 90s / early 2000’s. It was timely – as it drew parallels to my post comparing the former market darling to Nvidia (NVDA). I demonstrated both technical and fundamental similarities. However, another company came to mind. Tesla (TSLA). For the past few years – TSLA had what Dobelli calls the ‘halo effect’. However, is that now wearing off? And what implications does this have?
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Lessons from 1999/2000
Momentum is a powerful force. Bet against it at your peril. John Maynard Keynes was believed to have said “…the market can remain irrational longer than you can remain solvent”. Sound advice. Those expecting (or worse betting) the market would reverse to start 2024 are probably questioning their decision. It’s been one record close after another. Higher highs beget higher highs.
Santa’s Rotten Apple
What happened to the Santa Clause Rally? Bahhh humbug! For those less familiar, a Santa Claus Rally involves a rise in stock prices during the last 5 trading days in December and the first 2 trading days in the following January. Over these 7 trading days in question, stock prices have historically risen 76% of the time (to the tune of ~1.3%) – far more than the average performance over a 7-day period. But this year the market received a fat lump of coal. Or more accurately – perhaps a “bad apple”. Some feel that’s potentially a bad omen for the year ahead… giving rise to the popular Wall St. maxim “… if Santa Claus should fail to call, bears may come to Broad and Wall”….