A relentless rally in U.S. stocks shows few signs of slowing down as the S&P 500 notched its 57th record close of the year, up nearly 28% in 2024. The robust economy and expectations of lower interest rates are driving the market.
Momentum has been a hallmark of the rally, with the S&P 500 going over 13 months without straying 10% or more from its record high. Historically, corrections of 10% or more have occurred once per year on average. Despite some warnings that valuations may be excessive and signs of “froth” in the broader markets, many investors remain optimistic.
Bank of America’s Michael Hartnett notes the S&P 500 is trading at 5.3 times price to book value, exceeding its March 2000 peak. However, strategist Sonu Varghese says “momentum begets momentum,” and investor sentiment is skewed towards the bullish side. The Consumer Confidence Index showed a record 56.4% of consumers expect stocks to be higher in the next 12 months.
While some experts warn that the market may be due for a breather, many investors are happy to stay put for the time being. Fundstrat Global Advisors’ head of technical strategy Mark Newton says “overbought conditions” is not reason enough to exit stocks. A potential trigger for a market reversal could be volatility sparked by President-elect Trump’s threat to impose steep tariffs on U.S. trading partners.
Despite these concerns, the history of the S&P 500 suggests that calm may persist for a while. The Cboe Volatility Index has slumped to a near five-month low, and stocks have historically generated an average gain of around 1.6% in December, finishing the month higher 74% of the time.
Source: https://www.reuters.com/markets/us/strong-momentum-makes-it-hard-bet-against-freight-train-us-stock-rally-2024-12-09