How long will Trump rally continue?

Merry Christmas & Happy New Year

This is the Christmas weekend. So I will be brief. Since Trump got elected, the market has rallied over 10% non stop. It seems everyone is super bullish now, a drastic changed mood compared with that prior to the election. So the question is how long this Trump rally will continue. I bet it won't last too long!

Of course I know we are at the seasonally bullish period towards the year end, a Santa Claus rally that seems always coming every year. I won't bet for any meaningful decline in the next week. If anything, chance is high that the market may want to go up further to make everyone happy. Dow Jones is flirting around the historical 20000 level that will likely be taken out before we close the year. But I will be very cautious for the first few weeks or months in the new year due to 2 reasons:

• While typically what fund managers often do at this time is so called "window dressing" in order to juice up their performance that keeps up the buying pressure, one unique reason this year is probably also related to the Trump win. Everyone is now expecting a significant tax cut under the Trump's presidency that could occur next year. As such, taking profits now may mean paying higher tax than next year. Therefore, some selloffs may start soon after we move into the new year, especially among those who are already itching to sell to lock in the good profits.
• The more concerning indicator for a meaningful correction is again related to the overwhelmingly bullish sentiment. You are hardly hearing anyone talking about downside risk now but rather almost everyone is supper euphoric with everyday new highs occurring. The inflow of funds into equity ETFs, a good indicator for measuring the investors sentiment, is at the historically high level, meaning people are pouring money into stocks now. When such kind of extreme sentiment occurs, a turning point is often not far away.

If you are thinking to buy more at the moment, just be aware of the grave risk of some sudden correction that may occur any time.