With Christmas approaching, the anticipated rally of previous years has not materialized. The US stock market is clearly in decline, the crypto market is following suit, and the entire market is shrouded in red. It seems that only policy-driven positive news can turn the situation around now; everyone should prioritize risk management.

The absence of this "Christmas rally" is not uncommon, but each occurrence warrants caution. According to Jeff Hirsch, editor of the "Stock Trader's Almanac," when the traditional year-end rebound does not occur, it often signals the arrival of a bear market or suggests that stock prices have further downside in the coming period.

LPL Financial's database traces back to the 1990s. Over the past twenty years, this rally has been absent six times. Notably, in five of these six instances, the S&P 500 index experienced declines in January of the following year. Particularly, the bursting of the dot-com bubble in 2000 and the global financial crisis in 2008, two major bear markets, both occurred immediately after years of rally absence.

Specifically: in 1999, the rally was absent, followed by the dot-com bubble in 2000, leading to a long-term bear market in US stocks; in 2005, the rally was absent, and although the market was generally stable in 2006, it began to weaken after 2007; in 2007, the rally was absent, and the 2008 global financial crisis erupted, resulting in a brutal bear market; in 2015, the rally was absent, and the market experienced a mild correction early 2016; in 2022, the rally was absent, and the S&P 500 recorded its worst performance since 2008.

This repeated pattern in history is not a good sign for current market participants. Managing positions well and controlling risk exposure may be wiser than blindly being optimistic.