However, this year spared no living soul in giving a beating—foreign or local, institutional or retail all felt the same; all pain, no gain.
In recent months, there seems to be more blame traded between politicians and regulators than actual shares on the market floor.
Although no one resorted to violence in this exchange, investors bled as their portfolios gradually sank under the market overhang.
With no recourse seen out of this sticky situation in the near term, maybe it is a perfect time to pause and reflect on everything that has happened so far.
The “Santa Claus Rally”
Despite the PSE’s disappointing and lackluster performance so far, the year isn’t over yet. We are now one month into the fourth quarter—the time when hopes for a “Santa Claus rally” start to stir. Investors typically expect share prices to soar in the last quarter of the year regardless of fundamental reasons to move higher.
For the last 25 years, the index was up 19 out of 25 times in the last quarter, equating to a generous 76 percent chance of ending net positive for the final three months of the year. Although at this point, it sounds foolish to bank on the odds considering that our market has been—for the lack of a better term—a deadbeat to its investors.
While we are still open to entertaining the slim chance that we might see a last-minute bounce now that the multitude of headwinds facing our market are already heavily priced in, we are resigned to the fact that only the most pessimistic analysts will see their year-end index targets hit.
Where did the party go?
As we all know, a large chunk of local participants transitioned to different investment vehicles. The risk-averse locked in decent yields through government bonds before the rate-cutting cycle, while risk-seekers went to alternative investments—mostly cryptocurrencies.
Then there are the in-betweens who shifted to US equities—primarily the so-called Magnificent Seven and other tech companies that have poured hefty capex into artificial intelligence, betting it will fuel the next wave of earnings growth.
They all left the market in pursuit of safer, faster, and better returns with their hard-earned money. Meanwhile, the patriots are left with nothing, as only a very lucky few were able to make a killing in this market.
If you were not able to ride the few mini-trends locally—the rise of PLUS, the gradual REITs rally, or the recent gold rush—you are probably holding a paper loss or have realized losses from companies that you believe are fundamentally intact despite this prolonged economic downturn. A
At this point, there is no shame in retreat, and some peace of mind might be worth more than what was lost in the market.
Bargain or Warning Sign?
The PSEi’s current forward P/E of 8.81x is very close to the Global Financial Crisis low of 8.60x and already two standard deviations away from the 20-year average P/E of 14.56x.
(Editor’s note: The P/E, or price-to-earnings ratio, shows if a stock is cheap or pricey. A low P/E means it costs less compared to what the company earns, while a high P/E means investors are paying more because they expect bigger growth.)
On the surface, this appears to be a huge and unwarranted discount. However, one could argue that the market is simply reflecting the broader macroeconomic conditions surrounding these companies.
If that is the case, then those betting on deep-discount value plays may have walked straight into a value trap. Following the same premise, if the market is truly forward-looking, then current prices are showing tougher times ahead—or a discounted point of reversal.
No one knows, really. As with everything, time will eventually reveal the truth, which makes overthinking a complete waste of time.
Short but “sweet”
During the recently concluded summit in Kuala Lumpur, several ASEAN neighbors secured zero-tariff deals with the United States on select products, while the Philippines (and Indonesia) was left out in the cold—effectively stripping us of our competitive advantage.
Meanwhile, the persistent weakness of the peso could prompt foreign investors to repatriate their funds, while slower government spending, weather-related disruptions, and delayed capital formation weigh on the broader economy.
Yet something tells me a short relief rally is brewing—not lasting, but perhaps a small Christmas gift from Santa himself. Just don’t forget his note: sell before the year ends, as storm clouds continue to gather ahead and the relief rally will likely be short and sweet.
Financial market recommendations and comments on InsiderPH News belong solely to the analysts and institutions making them. They do not represent buy, sell or hold recommendations of InsiderPH News. Investments held by analysts or institutions may influence their recommendations. Investors should conduct their own research and carefully evaluate all relevant market information before making investment decisions. As always, the past performance of any investment does not guarantee its price appreciation in the future.
