The US stock market is experiencing a remarkable surge, with major indices posting impressive year-to-date gains. The S&P 500, a key benchmark for US equities, recently scaled its 52nd record high of the year, fueling optimism among investors. This robust performance puts the index on track to deliver year-over-year gains exceeding 20% for the second time, a testament to the resilience of the US economy.
While bullish sentiment dominates, a closer look at historical data reveals some intriguing insights. Ryan Detrick, chief market strategist at Carson Group LLC, unearthed a fascinating statistic: December has historically been a remarkably stable month for the stock market. Analyzing data from 1928 to 2023, Detrick found that December has only once been the worst-performing month in the past 95 years, in 2018, a period marked by a significant Federal Reserve policy misstep. This positive historical trend offers a surprising counterpoint to the often-voiced concerns surrounding year-end market volatility.
Further bolstering the bullish case is the analysis by David Cox, CMT, CFA, portfolio manager at Raymond James Ltd. Cox utilizes the 13/34-week Exponential Moving Average (EMA) as a key indicator of market trends. A bullish crossover occurs when the 13-week EMA surpasses the 34-week EMA, signaling a potential upward trend in the market. Cox’s charts highlight past bullish crossovers, indicating a potential for sustained growth. According to CMGWealth, the 13/34-week EMA analysis is a simple yet effective tool for identifying cyclical bull and bear market trends.
The current market optimism is further supported by the fact that markets are trading above pre-election levels, indicating confidence in the economic outlook. Expectations of a further 25 basis point rate cut in December have also increased, as indicated by the CME Group’s FedWatch tool, pointing to a continued favorable environment for stock market growth. This sentiment is reflected in the strong performance of major indices, with the Nasdaq 100, Dow Jones, and Russell 200 Index also exhibiting substantial year-to-date gains alongside the S&P 500. ETFs tracking these indices, like the SPY and QQQ, have also experienced significant growth, underlining the widespread market positivity.
While these positive indicators paint a bullish picture, investors should remain vigilant and maintain a balanced approach to investment decisions. Although December historically shows stability, the market remains subject to unpredictable fluctuations. Utilizing various analytical tools, such as technical indicators and historical data analysis, can help navigate the market’s inherent complexities and inform investment strategies. This period of growth presents both opportunities and challenges, urging investors to remain informed and adaptable in their market approach.
