Santa Rally in Doubt? Will BOJ Rate Hike Deepen Market Downturn?
U.S. November employment data released on Tuesday showed the unemployment rate unexpectedly rising to 4.6%. While still relatively low by historical standards, it marks the highest level since early 2021. Data from the University of Michigan indicate that as of November, most consumers expect unemployment to continue rising over the next year.
According to Morgan Stanley, if this week’s U.S. labor data show moderate softness, it could increase the probability of further Federal Reserve rate cuts, which would be supportive for equities. “We are firmly back in the ‘good news is bad news, bad news is good news’ regime,” Wilson wrote in a note.
He explained that while a strong labor market is positive for the economy, it reduces the likelihood of rate cuts in 2026.
Against the backdrop of softer employment data, $CME Bitcoin - main 2512(BTCmain)$ rebounded modestly. However, a heavy slate of macroeconomic data will continue to influence markets this week.
On December 18–19, 2025, the Bank of Japan is expected to raise its policy rate from 0.5% to 0.75%, the highest level since 1995, sending the strongest tightening signal in three decades.
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Historically, every BOJ rate hike has been followed by a period of correction in U.S. equities. With U.S. stocks currently at record highs, this does not necessarily mean history will repeat itself—but a cautious stance is certainly warranted.
Citi strategists, however, remain optimistic, forecasting $S&P 500(.SPX)$ to rise 12% to 7,700 by the end of 2026. The core drivers behind this outlook are strong earnings growth and an overall supportive Federal Reserve policy backdrop.
Will the Santa Claus rally still arrive?
Will a BOJ rate hike once again drain global liquidity and trigger a correction?
Are you staying in cash waiting for a pullback, or fully invested and riding out the drawdown?
Leave your comments to win tiger coins~
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也就是说，我正在密切关注日本央行。加息至0.75%将是一个有意义的转变，从历史上看，日本央行的紧缩政策与全球波动性上升同时发生。随着美国股市创下历史新高，即使历史不会完美重演，更谨慎的近期立场也是合理的。
在定位上，我既不是全现金，也不是盲目全押。我继续投资于核心持股，同时保留一些干粉以在宏观或日本央行头条新闻引发回调时进行部署。如果圣诞老人集会到来，我会参加；如果没有，我准备安然度过一些波动。
@Tiger_comments @TigerStars
However the Santa Claus Rally is starting to feel a lot like that Tooth Fairy : a lovely idea that we desperately want to believe in but the evidence is getting a little shaky.
The real bogeyman this holiday season is the Bank of Japan. A potential BoJ rate hike is the "lump of coal" that could crash the party. The culprit? The massive Japan Carry Trade.
Traders have borrowed trillions of yen at near zero interest rate and funelled that cash globally, fueling a massive market boom. If Bank of Japan raises rates, the carry trade rapidly unwinds.
The result : A sudden withdrawal of global liquidity, threatening a sharp market correction.
So let's proceed with caution and stay calm.
@Tiger_comments
Check them in the history - “community distribution“
A potential Bank of Japan (BOJ) rate hike could exacerbate worries about rising borrowing costs and inflation, adding further pressure on global risk assets
By draining liquidity and tightening financial conditions, such a move may deepen the market downturn, particularly affecting risk-sensitive assets like equities and emerging market bonds
As the year draws to a close, investors face a tough choice between staying in cash waiting for a pullback for protection against volatility, or remaining fully invested and riding out the drawdown for potential long-term growth
In these uncertain times, alignment of strategy with individual risk profiles and the broader economic outlook is essential to navigate current market challenges
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@Huat99
@Snowwhite
Likely path:
• Choppy markets into BOJ clarity
• Selective strength, not broad participation
• Relief once macro uncertainty clears
• Risk assets recover if global liquidity fears fade
Santa may arrive late, but history suggests he rarely skips the party entirely unless liquidity truly breaks.