empty
25.12.2023 07:04 AM
A week of high expectations on Wall Street: Santa's rally could bring historic results for US stocks

This image is no longer relevant

In December, the S&P 500 index has risen by more than 4%, and by 24% over the year, bringing it within 1% of reaching a new historical high. The benchmark index is also on track for its eighth consecutive positive week.

Historical trends suggest this momentum is likely to continue in the short term. The end of the year is typically a period of stock growth, known as the "Santa Claus Rally."

According to data from the Stock Trader's Almanac since 1969, the S&P 500 index has averaged a 1.3% gain during the last five days of December and the first two days of January. This increase is attributed to various factors, including pre-New Year purchases, post-tax sale activities, and general holiday optimism.

This year, optimism is high. Early in December, the Federal Reserve signaled an end to its historically tight monetary policy, projecting rate cuts in 2024, following signs of slowing inflation. Recent data confirmed this trend, showing that the annual U.S. inflation, measured by the Personal Consumption Expenditures (PCE) index, slowed further below 3% in November.

"History will still be about the Fed's 'dovish turn'," said Angelo Kourkafas, a senior investment strategist at Edward Jones. "This supports the markets and sentiment, and the situation is unlikely to change next week."

Investors have recently shown strong interest in stocks. Clients of BofA purchased U.S. stocks on a net basis for $6.4 billion in the last week, the largest weekly net inflow since October 2022, according to a BofA Global Research report on December 19.

Meanwhile, a "sharp rise" in purchases among retail investors has been observed over the last four to six weeks, according to a Vanda Research report on Wednesday.

Continued Interest in Riskier Assets and Market Outlook for 2024

In recent months, investors' aggressive pursuit of higher yields has shifted their focus towards riskier securities, according to a note from Vanda. This trend is expected to continue into the new year, as yields remain under pressure.

Ned Davis Research, referencing indicators that measure the breadth of the stock market, advised investors this week to shift an additional 5% from cash into stocks, bringing stock allocations to their maximum level in portfolio models.

Trading volumes are expected to be modest until the end of the year, as investors take holidays, making stocks particularly sensitive to unexpected news or large transactions.

An example of excessive movements occurred earlier this week when the S&P 500 index sharply dropped by 1.5% in one day. Market participants attributed this to a combination of low volumes, zero-day option activity, and institutional investor transactions after a prolonged period of stock growth.

Kevin Mann, president and chief investment officer of Hennion and Walsh Asset Management, mentioned that investors with surplus funds might seek to buy stocks next week due to "fear of missing out" on the stock rally, often referred to as "FOMO."

In November, U.S. prices fell for the first time in over three and a half years, leading to further inflation falling below 3%. Food prices decreased by 0.1%, and energy prices dropped by 2.7%. Over the 12 months leading up to November, the PCE price index increased by 2.6%, down from 2.9% in October. Economists had forecasted the PCE price index to remain unchanged monthly and to increase by 2.8% annually.

Excluding volatile food and energy components, the PCE price index rose by 0.1% in November, mirroring October's growth.

The so-called core PCE price index increased by 3.2% annually, the smallest rise since April 2021, after rising by 3.4% in October. The Federal Reserve monitors PCE price indicators to achieve its 2% inflation target.

Wall Street stocks traded higher. The dollar fell against a basket of currencies. Prices for U.S. Treasury bonds rose.

Last week, the U.S. Central Bank kept rates stable, and policymakers in new economic forecasts indicated the end of two years of historic monetary tightening, leading to a decrease in borrowing costs in 2024. Since March 2022, the Fed has raised the federal funds rate by 525 basis points to the current range of 5.25%-5.50%.

GDP growth estimates for the fourth quarter vary from 1.1% to 2.8% annually. In the third quarter, the economy grew by 4.9%.

"The U.S. economy is in good shape heading into 2024," said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania. "There will be no recession in 2024."

Thomas Frank,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

US Market News Digest for June 12: US stock market closes lower in light of US-China trade deal

US stock markets ended the session lower after the US and China had nailed down the highly anticipated trade deal. Despite the positive news backdrop, investors began to lock

Ekaterina Kiseleva 16:31 2025-06-12 UTC+2

Robinhood drops from the S&P 500 — domino effect hits global markets

Robinhood shares fell after the trading platform was excluded from the S&P 500. Warner Bros. stock declined following the company's announcement of plans to restructure its business. European stocks slid

14:54 2025-06-11 UTC+2

Daily contrasts: Nikkei rises, EUR slips, global markets hold breath ahead of US-China talks

J.M. Smucker declines. The World Bank cuts its 2025 global growth forecast. Nikkei advances, while Wall Street futures and the euro weaken. The dollar shows little movement, and bond markets

14:31 2025-06-11 UTC+2

US Market News Digest for June 11

The US stock market has reached projected levels and now enters a "quiet scouting phase" as investors await the release of key inflation figures. The upcoming data

Ekaterina Kiseleva 13:57 2025-06-11 UTC+2

Contrasts of the day: Nikkei up, euro down, world holds breath ahead of US-China talks

J.M. Smucker falls after pessimistic forecast World Bank cuts global growth forecast for 2025 Nikkei up, Wall Street futures and euro fall Dollar little changed, bonds await CPI and auction

Thomas Frank 07:48 2025-06-11 UTC+2

Rates rise: markets Await CPI, Trump clashes with Musk, Qualcomm acquires Alphawave

The May CPI report is set for release on Wednesday. A budget bill takes center stage amid a public disagreement between Trump and Musk. Alphawave surged following news

14:05 2025-06-10 UTC+2

US Market News Digest for June 10

The S&P 500 and Nasdaq 100 indices posted notable gains, driven by upbeat expectations ahead of the upcoming US-China trade negotiations. Investors are betting on a potential easing of tariffs

Ekaterina Kiseleva 12:52 2025-06-10 UTC+2

Robinhood Drops From S&P 500 — Domino Effect Hits Entire Market

Robinhood Falls After Platform Expelled From S&P 500 Warner Bros. Shares Fall After Company Says Plans to Split Business European Stocks Fall on UBS Drop, U.S.-China Trade Talks Loom McDonald's

Thomas Frank 12:49 2025-06-10 UTC+2

Rates rise as markets await CPI, Trump spar with Musk, Qualcomm acquires Alphawave

May CPI report due Wednesday Budget bill in spotlight amid Trump-Musk rift Alphawave jumps on Qualcomm takeover plans WPP falls after CEO resignation announcement S&P 500 just over 2% above

Thomas Frank 11:49 2025-06-09 UTC+2

Clash of the Titans: Musk vs. Trump as Investors Count Losses

Dow -0.25%, S&P 500 -0.53%, Nasdaq -0.83% Tesla Falls as Trump-Musk Public Feud Grows Initial Jobless Claims Rise for Second Week in a Row Adidas, Puma Shares Fall After Lululemon

Thomas Frank 11:45 2025-06-06 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.