From my perspective, the BoJ rate hike itself is no longer the real story — it's the expectation that matters. A 25 bps hike is widely priced in, and markets have spent weeks adjusting positioning around a "Japan normalization" narrative. When something becomes this consensus, the actual announcement often loses its shock value. That's why I see this meeting less as a trigger and more as a potential release valve for uncertainty.
The "shoe dropping" argument makes sense on paper: higher Japanese rates can strengthen the yen, unwind carry trades, and tighten global liquidity, which in theory pressures US equities. But markets rarely react most violently to what everyone already expects. If the BoJ delivers a clean, predictable hike without signaling an aggressive follow-up path, that clarity itself could reduce fear rather than amplify it.
For US equities, I'm not convinced this automatically leads to a sustained reversal. We've already seen positioning lighten, volatility rise, and sentiment cool off — especially in rate-sensitive and AI-heavy names. That kind of pre-emptive adjustment lowers the probability of a sharp downside surprise. A reversal only gains traction if the BoJ signals that policy normalization will be faster or more restrictive than markets currently assume.
As for the Santa Rally, I think it's still possible, but it would likely be a selective one rather than a broad melt-up. If the BoJ outcome removes a key macro overhang, risk assets could stabilize, allowing year-end flows, short-covering, and window dressing to support prices. That doesn't mean new highs across the board, but it does open the door for a tactical rebound.
Overall, I see this as a moment where clarity matters more than direction. A "boring" BoJ hike could actually be bullish by closing a major macro chapter for the year. Whether a Santa Rally starts will depend less on Japan itself, and more on how global markets respond once this long-anticipated event is finally out of the way.
As a retail investor, I focus mainly on the US and Singapore markets, combining a mix of technical trading and long-term investing strategies. I enjoy analyzing charts, spotting patterns, and making calculated moves based on both market sentiment and fundamentals. While I'm not a professional, I treat my portfolio seriously and continue to learn and grow with each trade. If you're also navigating the markets and enjoy discussing stocks, options, or market trends, feel free to follow me. Let's learn and grow together as a community.
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