The US Federal Reserve’s meeting later this month may face increased scrutiny as inflation data is set to be released, potentially dampening market optimism. The November consumer price index is expected to show a 0.2% increase from the prior month and 2.6% year-over-year growth, according to FactSet. This would mark no change in inflation from the previous month but also demonstrate stubborn price pressures.
Stronger-than-expected inflation data could derail hopes for a December rate cut from the Fed, as shown by the CME Group’s FedWatch tool, which indicates an 87% probability of lower rates after new US jobs data releases on Friday. The recent stock rally shows no signs of slowing down but is also becoming increasingly expensive, prompting investors to search for potential headwinds.
The P/E ratio in the S&P 500 has risen to 26, a level that is 32% greater than the average P/E over the past three decades. Despite this, investors are still expecting stocks to recover from any losses and end the year higher, driven by buoyant investor optimism and a strong fundamental setup.
Analysts, including Jay Woods of Freedom Capital Markets, expect the S&P 500 to reach levels around 6,200-6,300 before the end of the year. Tom Lee of Fundstrat Global Advisors also believes that investors can “buy the dips” and anticipate a strong Christmas rally. However, with some riskier parts of the market rallying, concerns about market frothiness have emerged.
The week ahead calendar includes key earnings releases from Oracle, Adobe, Broadcom, and Costco Wholesale, which could impact market sentiment. The American Association of Individual Investors noted an increase in bullish sentiment over the next six months, but experts caution that investors may soon become more cautious as the year progresses.
Source: https://www.cnbc.com/2024/12/06/stock-market-next-week-outlook-for-dec-9-13-2024.html