Longest Continuous Rally in 20 Years

December 29, 2023

The period from November 1st through the last day of January has traditionally accounted for over 50% of total stock market gains for the year.  December is typically the best performing month of that 3-month stretch but coming off a nearly 9% gain for the S&P 500 in November we wondered how much rally was left.  December moved higher from the beginning of the month to the end with all major indices hitting new 52-week highs and a few of them hitting all-time highs.  There is a belief that the Federal Reserve is done raising interest rates and that has historically been a good time to buy stocks.  In addition, we currently have a Goldilocks scenario with an economy that is still growing while interest rates, oil prices and inflation are all declining.  You would expect stocks to perform well in that environment and they have.  At the end of the month the S&P 500 had gained another 4.4% and ended the year up 24.2%.  The more representative equal weighted S&P 500 closed the year 11.8% higher.  Oil prices moved 6% lower in 2023, while gold gained 13%.  Artificial Intelligence drove the Magnificent 7 which helped the NASDAQ to its best year since 2003.

December began on a Friday with a continuation of the November rally and a new 52-week high for the 30 stock Dow Jones Industrial average.  The first full week of the month saw interest rates move to the lowest level in 3 months and the Magnificent 7 rally on more AI news. At the end of the week, we learned 199,000 new jobs were created in November and the S&P 500 ended the week with a fractional gain of .2%.  The second full week was the best of the month after Fed Chief Powell suggested they are done raising interest rates and will likely be cutting in 2024.  Those comments sent the market sharply higher with the Dow Jones Industrial average hitting a new all-time high.  At week’s end the S&P 500 was up 2.5%. The week before Christmas is traditionally a quiet week of trading with an upward bias and that is exactly what we had this year with the S&P 500 adding another .8%. The week between Christmas and New Years typically brings a Santa Claus Rally, which is the tendency of the market to move higher the last 5 business days of the year and the first 2 business days of the new year.  That happened again this year and sent the S&P 500 fractionally higher the last week in December.

January is the last month of the traditional 3-month strong period for stocks.  January has the largest inflow of funds into the market as everyone, including the highest paid amongst us, funds their 401k in January.  Only December and April close higher more often than January and we do expect the Goldilocks economy to continue into early next year.  The two wars seem to have gone to investor’s back burners as FOMO (fear of missing out) has taken center stage.  At this point stock valuations have little meaning as we pushed towards new all-time highs, but at some point, stock valuations will matter, and they are well above historic norms.  With the Federal Reserve likely done raising interest rates optimism is appropriate but stick with your personal risk tolerance and don’t let FOMO drive you.  We have been slow to put new money to work and may start to increase our protection if the rally continues at this pace.  We don’t expect major downside but a pullback from these elevated levels seems reasonable.

If you know someone who would be interested in learning more about Greenberg Financial Group, please contact us at 520-544-4909, or visit our website at www.greenbergfinancial.com. As always, the key to successful investing is to have a portfolio that is consistent with your investment objectives and risk tolerance. We invite you to listen to our weekly Money Matters radio show which airs every Sunday Morning from 8:00 AM to 10:00 AM on KNST AM 790.  You can also listen to us on iHeart radio, follow us on Twitter @gbergfinancial or on Facebook under Greenberg Financial Group.  Previous radio shows are available by going to www.iheart.com or using the iHeart app and typing Money Matters with Dean Greenberg.