"Autumn is historically a difficult season for markets, especially equities. In some cases even dramatic, as it was in 1929, 1987 and 2008. Various theories have been put forward to explain this phenomenon”. Thus begins the latest episode of "On the 4th floor", video column by Alessandro Fugnoli, Kairos strategist, dedicated this month to strange dynamics of seasonality.
“Psychologists – continues Fugnoli – talk about the depressive states triggered by the end of summer and the holidays. On a biological level, it has been said, the fact that the days are shorter, there is less light, the weather worsens…”.
In reality, according to Kairos' strategist, the autumn difficulties on the markets should rather be traced back to a more technical cause, which concerns the rhythms of the market: "Professional traders tend to close their positions at the end of the year, to then reopen them with the beginning of the new year. Historically, the buying phase goes on until the summer, when investors often find themselves pumped and start selling, often precipitously”.
But there is good news: "Generally at the end of the year, when you take stock - explains Fugnoli - the approach becomes more balanced and rational, so markets tend to recover with what is called the end of year rally".
In any case, autumn 2019 looks set to be "relatively calm: there are fears related to Brexit, the China-US negotiations and the economic cycle, but the markets can count on the formidable central bank support, which are all over the world lowering interest rates and they intend to continue to do so, probably also at the end of the year and in the beginning of 2020”.
Overall, therefore, “there are no serious and structural threats – concludes Fugnoli – Therefore it is perfectly legitimate to expect a recovery in the end of the year and in any case with stronger markets than current levels”.
