Melbourne Cup day is the official start to the silly season, which traditionally stretched until Australia Day. There were days when Australian investors could effectively switch off for summer. However, the demands of the globally interconnected investment world means clocking off for that long is risky, and this year there are events that demand attention.

Naturally, markets are through the first of the silly season events – the US election. Despite the election of the candidate markets feared, shares are higher. There is a spreading view that “president-elect Trump” is a much more careful and stimulatory leader than “candidate Trump”. All four major US share market indices hit new highs, industrial commodities soared and gold and US bond markets have rolled over.

We’ve talked before about the improvements that arrived under cover of the noise of the US election (3 things you missed during the US election circus). In summary, the economy in China moved further ahead, higher priced market darling shares came back to earth, and  Australia’s big four banks all reported solidly, if dully.

Adding to the positive momentum for local investors is the strength in commodity prices. Normally this would bring a higher AUD. While the little battler is higher versus JPY and EUR, it’s lower against the rising USD. This is a powerful combination for Australian resource shares, lifting earnings and at the same time making share prices look cheaper to international investors.

With these factors in place there must be a reasonable chance of a Santa Claus rally, surely? The answer is “yes, but”. The “buts” are hurdles the market needs to jump, and the upcoming OPEC meeting, the Italian referendum and the US Federal Reserve interest rate decision are all on the investment radar.

Many headline writers attribute the recent oil price rises to a potential OPEC agreement to cut production. While it’s important to welcome newcomers to the employment markets, only inexperience should allow journalists to reach that conclusion. OPEC production limits are usually observed in the breach.

The best case scenario for those looking for higher oil prices is that OPEC and various members will make statements that an “historic agreement” is in place. OPEC production plummets immediately and oil prices leap. Over the next year OPEC production creeps higher, back to levels above the original cut. In the meantime more agile producers jump back into action, hedge their anticipated production, and OPEC faces more competition than ever.

In other words, oil prices are likely stuck between $40 and $50 a barrel, with potential to spike to $55 occasionally. Despite this essentially sideways outlook, commentators will continue to forecast doom and boom based on that day’s oil price. Investors may see opportunities where short term swings are due to extreme thinking on energy prices. Investor take-away; much ado about nothing. Take advantage of any short term impacts.

On December 4 the Italian people will vote on sweeping electoral reform. Proposed by the PM Matteo Renzi, proponents argue the reforms will streamline political decision making. However, fears of a Brexit style vote against, and possible implications for the European Union, are causing some investors heartburn. Investors take-away; a vote “for” is a modest positive. A vote “against” is a potential market disaster, although considered unlikely. Then, again, so was Brexit….

The US Federal reserve Open Market Committee meets for the last time this year on December 13-14. A 0.25% rise in interest rates is now baked in. assuming this is the case, the market will simply move-on, after a careful examination of the dot plot – the FOMC members estimate of where interest rates will be at the end of 2017 and 2018. Investor take-away; a 025% rise is now the neutral path. A failure to lift or a 0.5% rise would rattle markets. Possible reactions are highly unpredictable.