The S&P 500 has had a strong run in 2024, gaining over 20% through November. This typically bodes well for the final month of the year, according to Ned Davis Research. “Big gains tend to be followed by additional gains,” said Ed Clissold, chief U.S. strategist at Ned Davis Research.
Something to be thankful for?
December has been the worst month of the year for stocks only once going back 95 years (2018 and the Fed policy mistake).
Worst month this year has been the 4% drop in April. pic.twitter.com/2ThL3DwD7x
— Ryan Detrick, CMT (@RyanDetrick) November 28, 2024
“The message is bullish through the end of 2024.”
And, as a follow up to the previous post, this from Bloomberg:
“Despite the ever-growing valuation gap between American assets and the rest of the world, inflows into US stocks have accelerated over the past month.”#markets #stocks #investing #investors pic.twitter.com/1nn9PpWYbk
— Mohamed A. El-Erian (@elerianm) November 30, 2024
Stocks To Watch | ? Ready, set, trade! Keep an eye on these stocks as they set the market abuzz #StockMarket pic.twitter.com/1Y9Uck9uCO
— ET NOW (@ETNOWlive) November 29, 2024
In years when the S&P 500 has gained more than 20% through November, it has climbed 76% of the time in December, averaging a median gain of 2.1%. This is partly because a positive December that follows a big up year reduces the ability to harvest much in tax-loss selling. “The key takeaway is that positive returns have not pulled forward gains,” Clissold said.
The last time the S&P 500 declined in December after seeing a 20% gain through November was in 1996. Ned Davis continues to recommend overweighting U.S. stocks, even though the S&P 500 has already exceeded the firm’s year-end target of 5,950. The index touched an all-time high of 6,043.18 in Friday’s holiday-shortened trading session, bringing this year’s rally to 26.7%.
Stocks soared to record highs in November as Wall Street looked ahead to a second term for President-elect Donald Trump. The S&P 500 climbed 5.7%, while the Dow Jones Industrial Average advanced 7.5%, and the Nasdaq Composite added 6.2%. The Russell 2000, an index of small-cap stocks, surged nearly 11%.
Market participants in December are likely to continue paying special attention to Trump and his policy proposals. Wall Street will also be attuned to the near-term economic outlook, especially inflation and the labor market.
S&P 500’s December gain trends
The Federal Reserve is scheduled to make its last interest rate decision of the year on December 18. Despite favorable odds, the holiday trading session post-Thanksgiving didn’t produce a positive day for the S&P 500. However, there was fairly strong speculative action under the surface.
Smaller stocks demonstrated strength, as the market breadth was positive with about 5,350 gainers versus 4,100 losers. Yet, the Magnificent Seven struggled with nearly a 1% loss, dragging down the major indexes. There was a substantial list of small stocks experiencing upside moves of more than 10%, with over 750 names hitting new 12-month highs.
However, media attention often overlooks such performances in smaller stocks, contributing to a somber market mood. The economic news was mixed but offset by stronger growth. Bonds were higher, while the dollar slipped.
Currently, the odds are around 66% for a Federal Reserve rate cut by a quarter point on December 18. The primary market theme for several weeks now has been rotation into smaller stocks and aggressive speculative trading. This increases volatility but also creates a favorable environment for stock pickers with shorter time frames.
December appears to favor active trading of smaller stocks. Keeping a positive mindset and diligently finding trading opportunities will be crucial for investors.
