00:00 Julie
Usually at this time of the year, investors expect any market volatility to be swept aside by an incoming Santa Claus rally in December, but 2025 isn’t a usual type of year. A soft labor market and sticky inflation are two factors that could cause Santa to take a detour and skip the usual December bounce.
00:23 Julie
Joining me, Omar Aguilar, Schwab Asset Management CEO and CIO and Amy Woo Silverman, RBC Capital Markets Head of Derivative Strategy. Thanks to you both for being here. Um, Amy, I’m going to start with you because I know that you watch volatility very closely. We’ve been seeing an uptick in volatility recently. How do we know if it’s going to stick around into December and make December unusual?
00:54 Amy Wu Silverman
Yeah, it’s interesting because seasonally when we hit Thanksgiving, then volatility starts to slow down a little. You get that grind and then you get that Santa rally. You know, Julie, if you look at all the months this year, none of them have behaved the way they have seasonally.
01:13 Amy Wu Silverman
And I kind of expect that to continue because we’re actually seeing in the options market a pretty big increase in bearish sentiment that tells me that investors are starting to think more about hedges, and frankly, they start to work a little bit more, which has increased the demand on the downside.
01:34 Amy Wu Silverman
So, I don’t know if we’ll get that Santa rally, but we’ll definitely get perhaps another volatility pot hole or a rally in volatility.
01:43 Julie
Hmm, Omar, what do you think? Are do you see also that there are some sort of fundamental speed bumps maybe between now and the end of the year?
01:53 Omar Aguilar
Yes, we uh we see a lot of dispersion and a lot of discrepancy across many things. On one hand, we’re getting new economic data. So at the macro level, we’re starting to just get data that we didn’t have for several weeks. Uh and that’s sort of been um absorbed by the market and that has created volatility.
02:14 Omar Aguilar
Uh, we have seen parts of the beginning of unwinding of that momentum trade that we have talked about since April, and that has put, you know, areas that have been done very well this year, you know, to start, you know, losing some uh performance.
02:32 Omar Aguilar
So we see some of those fundamental going into there and and the opportunities for a catalyst that will propel the market up don’t seem to be that strong this time. You know, maybe the Fed, you know, cutting rates will probably put that extra, you know, piece to just get the the market going, but it’s still unclear that that will happen in December.