{"id":9962,"date":"2024-12-09T16:27:36","date_gmt":"2024-12-09T16:27:36","guid":{"rendered":"https:\/\/zacksim.com\/financial-professionals-insights\/?p=9962"},"modified":"2024-12-09T16:27:37","modified_gmt":"2024-12-09T16:27:37","slug":"will-this-post-election-rally-last-through-the-end-of-2024","status":"publish","type":"post","link":"https:\/\/zacksim.com\/financial-professionals-insights\/will-this-post-election-rally-last-through-the-end-of-2024\/","title":{"rendered":"Will This Post-Election Rally Last Through The End Of 2024?"},"content":{"rendered":"\n

Can the Post-Election Rally Last to the End of the Year?<\/strong><\/p>\n\n\n\n

At the outset of 2024, most large banks were forecasting the S&P 500 Index to finish around 5,200, which would have implied a roughly 10% gain for the year. U.S. stocks had different plans.<\/p>\n\n\n\n

Bolstered by stronger-than-appreciated U.S. consumer spending, steady economic and earnings growth, declining inflation, and the Federal Reserve\u2019s pivot to looser monetary policy, U.S. stocks have delivered a rally over double the magnitude of most expectations.1<\/sup><\/p>\n\n\n\n

The U.S. presidential election seems to have catalyzed the momentum. In the week following the election, the S&P 500 Index jumped +4.7% \u2013 the strongest week since October 2022. I\u2019ve argued before that the \u2018removal of uncertainty\u2019 was a key driver of this short-term market strength, but I also think it\u2019s fair to say the market was pricing-in hopes for lower taxes and lighter regulation, both of which could promote growth.<\/p>\n\n\n\n

The question for investors is, can this post-election rally continue through the end of the year?<\/em><\/p>\n\n\n\n

I think it can.<\/p>\n\n\n\n

The first factor I\u2019d consider is seasonal. Looking back to 1950, December ranks as the second-best performance month for the S&P 500, with an average gain of 1.3%. But December is also the most consistently positive<\/em> month, with the highest frequency of advances of any month with the lowest volatility (based on data since 1950). On average, gains have been broad-based, but small- and mid-caps have tended to outperform historically.<\/p>\n\n\n\n

Strong gains leading up to December have also ushered in a strong close to the year. In the last ten instances when the S&P 500 Index entered December up more than +20%, the final month saw an average gain of +2.4%. In this historical context, strong gains beget more strong gains.<\/p>\n\n\n\n

I also think the market could keep pricing-in major policy shifts as the new administration\u2019s agenda comes into clearer focus. The prospect of sizable fiscal stimulus (tax cuts) into an economy that\u2019s already growing roughly 2.5% to 3% could be a significant catalyst to growth, and it could also mean adding to an already historically large U.S. fiscal deficit. In my view, this could put upward pressure on long-duration U.S. Treasuries, which could finally un-invert and eventually steepen the yield curve (Fed rate cuts would also help). A steeper yield curve would arguably help Financials while also having the potential to stimulate more lending, an economic positive.<\/p>\n\n\n\n

The Yield Curve Could Steepen with Further Fed Cuts and Rising Long-Duration Treasury Yields<\/em><\/strong><\/p>\n\n\n\n

\"\"
Source: Federal Reserve Bank of St. Louis2<\/sup><\/em><\/strong><\/figcaption><\/figure>\n\n\n\n

Finally, no commentary about the potential for more stock market appreciation would be complete without talking about earnings.3<\/sup><\/p>\n\n\n\n

For the third quarter, total earnings for the S&P 500 index are expected to be up +8.1% from the same period last year on +5.7% higher revenues. If we exclude the volatile Energy sector, whose Q3 earnings were down -22.9% from the same period last year on -2.7% lower revenues, then earnings would have been up +10.6% on +6.3% higher revenues. This level of solid earnings growth has been present throughout 2024, and as seen on the chart below, is expected to accelerate in the new year:<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

A final point to make on earnings is that unlike the unusually high magnitude of estimate cuts we had seen ahead of the Q3 earnings season, estimates for Q4 are holding up a lot better, as the chart below shows. Heading into the final stretch, companies are feeling more confident about sales and earnings than they were previously.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Bottom Line for Investors<\/strong><\/p>\n\n\n\n

I want to be clear that while I think stocks can <\/em>continue to rally into the end of the year and early next, based on the factors laid out above, I am not suggesting they will <\/em>rally.No one can truly predict what stocks will do in the short term, and downside volatility and\/or a correction can occur at any time and for any reason.<\/p>\n\n\n\n

Thinking further ahead, I do think economic fundamentals remain supportive of higher equity prices, and earnings and economic growth could benefit from lower taxes and looser regulation. In other words, the ingredients for more equity market gains are present, it\u2019s just a matter of whether the realities of those policies and growth will meet and\/or exceed expectations. For now, I think they can. <\/p>\n","protected":false},"excerpt":{"rendered":"

The conclusion of this year’s election catalyzed the ongoing stock rally\u2014but will this momentum continue? Mitch offers his perspective. <\/p>\n","protected":false},"author":4,"featured_media":9963,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[181,1],"tags":[],"class_list":["post-9962","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-financial-professionals","category-mitch-on-the-markets"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/posts\/9962","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/comments?post=9962"}],"version-history":[{"count":2,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/posts\/9962\/revisions"}],"predecessor-version":[{"id":9968,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/posts\/9962\/revisions\/9968"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/media\/9963"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/media?parent=9962"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/categories?post=9962"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/tags?post=9962"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}