Will the Santa Claus Rally Show Up This Year?
With the markets pulling back last week, you may ask yourself: “Will the Santa Claus rally show up this year?”
The S&P 500 showed some weakness last week, selling off by 2/3rds of 1%. The direction of interest rates and mixed data on inflation seemed to be responsible for the pullback.
But that doesn’t necessarily mean that the annual “Santa Claus rally” isn’t likely to materialize.
Remember December
In fact, if you look at data all the way back to the 1950s, you will find that December rallies in the stock market usually begin around the 15th of the month. Said another way, it’s nothing unusual to have a choppy market in the first half of December.
We will see how the rest of the month actually plays out, and we will keep in mind the admonition that past performance doesn’t necessarily foretell future results.
Small Business Optimism Fuels Capital Spending
On the economic front, there is a great deal of optimism among small business owners, and that optimism is moving those business owners to plan to increase their capital spending next year.
It appears that the outcome of the presidential election has been enough to make independent business owners very bullish on the future of their businesses.
Take a look at this chart from the National Federation of Independent Businesses.
You can clearly see that things changed right after the election in terms of plans to spend more money on their business.
Capital expenditures play an important role in the economy, and a ramp-up in business investment will support economic growth in the near term.
Analyst Concerns About Market Bubbles
Everything isn’t rosy with the analysts we work with at GenWealth:
Scott Brown of Brown Technical Insights, who incidentally guides the GenWealth technical equity portfolio, has assessed a bear case for the market.
Brown says everything from bitcoin mania to bubbles forming in a wide variety of large cap stocks has him concerned.
Brown says there’s a bit too much optimism when he sees consumer confidence in future stock prices at an all-time high.
This chart shows a record high 56.4 percent of investors feel the stocks will be higher over the next 12 months. Brown seems to be saying, “trees don’t grow to the sky, and neither do stocks.
Looking Ahead to 2025
So, there’s a lot to look forward to…and a lot to keep an eye on as we move into 2025!
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Independent Advisor Alliance. Independent Advisor Alliance and GenWealth Financial Advisors are separate entities from LPL Financial.
