The View | Why the Santa rally in stock markets may just be a little late

In mid-November, I confidently predicted the traditional Santa rally leading up to Christmas. It was as expected as a government denial of incompetence. A weak October and November indicated that investors would turn the tide and look to pick up some bargains before the New Year.

Instead, we had the biggest December rout in the markets since the Great Depression, with the S&P 500 falling by more than 10 per cent, before recovering to 8 per cent. The record for the worst December before that was a fall of 6 per cent in 2002. December is usually the best month of the year and, since 1950, they post an average rise of 1.53 per cent. Occasionally, we get it wrong.

In mitigation, the difference between success and failure can be very small. The known knowns were clear. US President Donald Trump’s trade tariff tantrums and China’s angry denials; his increasingly confusing tweetstorm against Federal Reserve Board chairman Jerome Powell; Iranian sanctions; and the monumental 40-odd per cent free fall of the oil price since early October were easily discounted.

The unknown knowns were not that obscure, either. How much is the Fed going to drive up interest rates before they are “normalised”, and what is normal? China’s tit-for-tat arrest of Canadian citizens – are visitors to China no longer safe? Why is US Treasury Secretary Steve Mnuchin calling the chief executives of the big banks – does he know something we don’t?