Strong ending expected for 2024
Steve M. Wyett, CFA
Chief Investment Strategist | Public Speaker | Market Analyst
This week's commentary is provided by Mark Gibbens, CFA, CAIA, CFP?, Investment Strategist at BOK Financial.
It’s that time of the year. We are in the midst of the holiday season and the end of the year is quickly approaching. The stock market has had a stellar year, with the S&P 500 delivering a 23% gain so far. Many who only follow the markets casually may think the market is done for the year and expect a pullback given 2024’s strong gains. While they may be right, let’s take a look at how the year usually wraps up.
Looking back since 1965, November and December make up two of the top three months of performance for the S&P 500. It’s difficult to see why this year should differ from the typical year. For one, we now have uncertainty about the election behind us. Also, as previously mentioned, stock market performance has been great this year. Not only has performance been great, but it has been relatively concentrated, which may lead many managers who have been underexposed to the tech trade to performance chasing at the tail end of the year as managers bid up shares.
There are, of course, potential headwinds. We just received some agita from the geopolitical situation in Ukraine, as Russia lowered its threshold in using nuclear weapons. The 10-year Treasury yield has risen, we believe, mostly in response to the outlook for economic growth, but if the 10-year starts to make its way toward 5%, it could weigh down stocks. There are also valuation concerns as the S&P 500 trades at 22 times forward earnings. Despite these and other risks, it still strikes us that it is more likely that the S&P 500 ends the year higher than current levels.
As market participants begin to look toward 2025, there will be much discussion surrounding the implementation of the new administration’s policies- immigration, tariffs, regulations- and earnings expectations for the coming year. Changes should also impact the outlook for the Federal Reserve and monetary policy. Historically the year ends on a strong note, and our outlook for 2025 remains on the optimistic side.