December is always a defining month for the equity markets. It is the vacation hour for global fund managers. They take stock in December and adopt changes in their strategy for the coming year. Similarly, domestic fund managers also take stock of the emerging macros and realign their strategies.
December and January usually witness very different investment behaviour from the same investors. The question before investors this December is simple. Will we see a significant shift in investor strategy in 2018? Will choices change dramatically? This will start to show in December itself, as savvy investors realign their portfolios towards what they believe will be the dominant themes of 2018. We will also get an inkling of global fund allocations, the outlay for emerging markets.
A top down trade in the stock market has somehow been elusive. Investors have largely bet upon thematic schemes among micro, small, and midcaps. We should get some clarity on how the top down trade will play out. If we should see weakness at the index level, then December promises to be a test of our market’s resilience. We will clearly know the latent strength still residing within the successful investment themes of 2017. It will become evident if there is investment fatigue in some of them. Knowing the market’s fickle nature, a rotation of themes cannot be ruled out.
The favourites of 2018 could well be very different from those of 2017. The market always tends to do things we don’t expect it to do. This time will be no different.
“There’s only one way to describe most investors: trend followers.” – Howard Marks