The correction, which began in November, pushed the main Russian stock indexes from their 2019 highs by five percent, turning into a small but noticeable downtrend. The stockbrokers are confused! There was talk of a rally. Shares – former favorites of growth, forgotten, and to cheap securities – past outsiders, in general, lost even minimal interest. And weak shares have already gone to the lows of the year, not delighting their owners.
Against this background came to the fore the belief that in December the dollar is always strong against the ruble. It is difficult to guess where the roots of this belief grow. Perhaps the memory market is short – contains information for a maximum of a couple of years? That’s how the market lives horrors about the growth of the dollar in December 2014 and 2016. Or maybe the purchase of the dollar is a panacea for those who want to earn at the end of the year?
Let’s check whether it is fair to say that in December it is necessary to buy a dollar against the ruble.
To do this, we will make simple calculations, compare the cost at the opening, closing, minimum and high of December. Since 2000, the dollar against the ruble has fallen nine times since 2000 and has grown 9 times. Once closed neutrally. The average percent of the dollar growth in December is 3.44%, the average percentage of the fall is 2.18%. That is, the risk on income when buying a dollar 1 to 1.6 (roughly speaking, to earn in a good situation can be slightly more than lose). And the ratio acceptable in the classics of risk management is 1 to 3.
We’re going to move on. In fairness, we note that in the study period in December always, except in 2005, the dollar rose to the ruble within a month compared to the beginning of winter trading. And if you’re lucky with a crystal ball that tells you where the pair peak in December, you can earn an average of 4.44%. What is not a crystal ball? What a pity…
Remarkably, catching the dollar in December below the level of its opening was always possible, except 2004. If you bought a dollar on the first day of winter, then on average you can see its maximum drawdown at 1.62%.
Even if it is possible to clearly predict the lows and highs of the dollar against the ruble in December, the normal risk ratio to the research income since 2000 will not work.
Another myth is broken! Use calmly fundamental and technical analysis, trust those lines that draw yourself, not grandmother’s fairy tales! (If you do not know how to do analitise, please apply). There is no pressure on the ruble “Scary December” from the past.
Why analysts and stock gurus of all stripes talk about the strength of the dollar to the ruble in December is a mystery, as well as why they believe in the growth of the Thanksgiving rally. It is to be hoped that there is no malice in their ignorance.
Yulia Afanasieva, ANALYST at FINAM