A Second Consecutive Year With S&P Up More Than 20%

December 31, 2024

December is traditionally one of the best months of the year for the stock market.  Investors tend to be in a festive mood sending the market higher 73% of the time, nearly 10% more often than the next strongest month, which is April.  However, coming into the month the S&P 500 was already nearly 30% higher for the year and, as we have been saying, valuations have become very rich, nearly doubling traditional stock market valuations.  In addition, interest rates have been rising since hitting an 18-month low in September and rising interest rates make stock market gains more difficult.  We have been expecting some type of market pullback but with seasonality on the side of the bulls and excitement about Trump 2.0 we expect any pullback to be contained.  The rally we have been watching all year continued into early December with the major indices hitting more new all-time highs, but steadily rising interest rates weighed on the market during the second half sending the S&P 500 down 2.5% for the month but still 23.3% higher for 2024.  The rate on the benchmark 10-year Treasury rose by 13% to the highest level since May.  Gold has been strong this year pushed by significant Chinese buying but was lower in December and oil edged higher but is still 25% off the 2024 high hit in April.

Coming off a strong November, the rally continued into early December.  Solid earnings reports from technology companies and a “risk on” attitude helped drive the market.  Bitcoin continued its post-election rally moving above $100,000 for the first time.  At week’s end we learned a stronger than expected 227,000 new jobs were created in November and the S&P 500 ended the week with a gain of 1%.  The second week was all about inflation, and we learned both the Consumer Price Index and the Producer Price Index moved higher in November which put upward pressure on interest rates and weighed on stocks.  At the end of the week the S&P had given back .6%.  During the last full week before Christmas rising interest rates continued to put downward pressure on stocks.  The Fed did cut interest rates by the expected 25 basis points but suggested they may pause future rate cuts which the market did not want to hear.  That news sent the S&P 500 down more than 3% and the 30-stock Dow to its longest consecutive day losing streak since 1974! The week ended with a report the Personal Consumption Expenditure index, the Feds favorite inflation gauge, dropped in November which helped mitigate some of the week’s losses.  Despite a good day on Friday the S&P dropped 2% for the week and into the red for the month.  Christmas week brought light volume and with light volume often comes high volatility.  The S&P 500 was in a festive mood ahead of the holiday gaining nearly 2% but giving nearly half that gain back the Friday after Christmas before ending the week up .7%.  The last 2 days of 2024 saw year end profit taking making the month a rare down December.

January is typically a good month for the market as we see the largest inflow into retirement accounts of any month.  Historically the month is the 4^th best of the year for gains and is the 3^rd month most likely to close higher, following only December and April.  We will continue to see interest rates dictate much of the action as higher rates are likely to weigh on stocks, while any relief should be greeted warmly.  President Trump will officially take office, and we expect him to hit the ground running which could impact stocks.  The market will be closed on January 9^th for a National Day of Mourning for President Carter and again on January 19^th in observance of Martin Luther King Jr. Day.  Stocks continue to be richly priced but enthusiasm about Trump 2.0 should help mitigate any weakness.  We have been cautious over the past few months and look to deploy capital on any tradeable decline.  We urge you to stick with an asset allocation that is comfortable for you and not to get caught up in the volatility.

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.