Market sentiment has turned more constructive. The initial weakness at the start of December appears to be driven more by position‐clearing and profit‐taking than by a change in fundamentals. With bond yields stabilising, liquidity expectations improving and earnings guidance still broadly supportive, investors seem willing to re-engage with risk assets. The rebound across all three major indices reflects this shift.
Whether December finishes strong depends on two factors: flows and macro. Historically, December benefits from fund rebalancing and year-end window dressing. Provided no major macro shock emerges, the pattern of a soft start followed by a firmer finish can repeat. The key risk remains any unexpected tightening in financial conditions, though the current backdrop looks favourable.
For trading, a balanced stance is sensible. If you have already met your annual targets, reducing position size and protecting gains is entirely reasonable. If you are still pursuing a year-end objective, selective participation in high-liquidity names is a better approach than broad risk-on exposure. I would focus on assets with defined catalysts this month, such as megacap tech, gold-related instruments and selective AI infrastructure plays. The aim is to keep risk contained while still capturing potential upside as seasonal tailwinds build.
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