Chinese New Year holidays begin Monday

Monday, Feb 8 is Chinese New Year and that could be a good sign for markets as one of the main sources of volatility is removed -- at least in the short term.

We finish the year of the Sheep. In FX, following the pack in US dollar longs last year was a great trade, so the Chinese wisdom proved correct.

We're now heading into the year of the Red Monkey and that argues for more volatility, according to BTInvest.

Here's what they say:

"Do not expect the Year of the Monkey to be easy for investments. You need to outsmart the monkey to do well in the lunar year 2016. Do expect world events impacting stock markets and investments to change sharply and quickly, like the agile monkey."

Expect markets to be volatile in the first half of the year (we've already got that) and for events unfold quickly, their Chinese astrology expert says.

"The Year of the Monkey is going to shake, rattle and roil financial markets. One has to be as intelligent, witty and nimble as the monkey to do well in such investment landscape," he writes.

The most-recent Monkey year was 2004. In that year the Shanghai Composite climbed 36% only to come crashing down in a 44% correction that bottomed in June 2005 (and then rallied 500%).

Events in 2004:

  • EU expands to include Poland, Lithuania, Latvia, Estonia, the Czech Republic, Slovakia, Slovenia, Hungary, Malta and Cyprus
  • Facebook launched, Gmail released
  • Bush re-elected
  • Athens Olympics

1980 1992 was also a Year of the Monkey and that was the year that George Soros broke the Bank of England. Many hedge fund managers are making a similar trade this year, betting on China to revalue the yuan.

From Eamonn earlier: Chinese New Year market holidays next week - your guide to who is open and when