Another Strong Year
It has been another strong year for the markets in 2024, and we don’t anticipate significant changes in the final weeks of the year. As the year winds down, most investors are shifting their focus to 2025, which also brings out the "experts" and their predictions for the next twelve months. As we edge closer to the new year, it’s always worth remembering just how often major banks and brokerage firms miss the mark with their annual outlooks.
The S&P 500 closed November at 6,032.38, marking a gain of approximately 26% since the beginning of the year. Once again, it has been a very good year for the S&P 500, and yet another year where the market has performed almost the exact opposite of what major Wall Street firms forecasted.
Wall Street Predictions Missed the Mark
The average initial 2024 price target for the S&P 500 from the 11 major Wall Street firms listed above was just over 4,800, which would have represented a gain of less than 1% for the year. Granted these firms revise their forecasts throughout the year— conveniently aligning their final targets closer to the actual index value—this adjustment process underscores the unreliability of their initial predictions. So, over the next few weeks as you are inundated with expert opinions about how the market will perform in 2025, just remember that most of these expectations are usually incorrect.
December Market Outlook: Historically a Strong Month
Historically, when the market has performed as strongly as it has during the first eleven months of the year, December tends to follow suit with positive returns. When the S&P 500 gains more than 15% through September, the final three months of the year tend to be solid, with December typically being the strongest month of the fourth quarter. Since 1970, there have been 12 instances where the S&P showed similar strength, and in about 75% of those cases, December performance was positive, with an average gain of 2.56%.
We can also examine the S&P 500's strong performance this year in the context of its typical behavior during a presidential election year. A noteworthy characteristic of the Election Year Cycle, regardless of the election's outcome, is a strong relief rally that often extends through the end of the year. This year, the market's performance over the past month has closely aligned with historical patterns. In election years, December performance is positive approximately 85% of the time, with an average monthly return of 1.25%.
Given the historical performance of the S&P 500 during exceptionally strong years and presidential election years, we anticipate that market returns this month will once again be positive.
Preparing for 2025
We will return in a few weeks with our market outlook for 2025. While we remain optimistic about the markets and the short term, the concerns we highlighted in our July Recession webinar have continued to grow. In our next update, we will provide more details and updates to our expectations, based on the economic indicators we monitor closely.
Looking ahead, we expect the market in 2025 to present more challenges compared to the last two years. Nevertheless, we will maintain an open-minded and flexible approach to our investment strategies as conditions evolve.
Until then, we wish you a wonderful holiday season with family and friends!
Brad Tremitiere, CIO
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