One benefit of looking at past large stock declines is that it demystifies some uncertainty around bear markets. History tells us that stocks probably saw most of their bear market. Using a rebound in economic activity as a signal to become more optimistic about stocks is almost certain to fail.

The Santa Claus Rally period starts Friday, December 23, with stocks rising an average of 1.3% since 1969. Time will tell if the seasonal market blessings arrive or the Grinch will spoil our investors’ holiday. In any case, the odds favor investors remaining invested during the holiday season.

Markets have a very different expectation of what the Fed will actually do in 2023. Regardless of whether the Fed or markets are correct, the macroeconomic focus should continue to move stocks as a group and uncover some opportunities for long-term investors to upgrade portfolios.

In what seems like the financial market equivalent to the movie Groundhog Day, stocks will be waiting for the November consumer inflation reading on Tuesday and the Fed meeting on Wednesday. Regardless of the CPI print, the outcome of the Fed meeting is almost inevitable at a 50 basis point hike.

Wage data didn’t spoil the party, but it threw some cold water on the optimism from Fed Chair Powell’s comments. Stocks seem likely to remain hostage to expectations for Fed rate hikes and yields until there is some clarity around the war against inflation and the toll it will take on the economy.