Forget the mashed potatoes. In November, stocks were the real gravy train, and it looks like they can keep chugging ahead.
It was a shorter week for the market, as Americans celebrated the Thanksgiving holiday, but that didn’t stop the S&P 500 index from reaching its 53rd record close of the year. The Dow Jones Industrial Average managed its 47th record close, too.
Overall, November was another spectacular month in what was already a great year, with the S&P 500 up 5.7%, putting its year-to-date gain at 26.5%. Remarkably, that was the least impressive of the major indexes, with the Nasdaq Composite up 6.2%, the Dow up 7.5%, and the Russell 2000 up 10.8%.
The postelection euphoria has given way to a more pragmatic analysis of how changes in Washington may shake out, but Inauguration Day is still far enough away not to cause too much worry. For now, there seems to be little to stop a year-end Santa Claus rally.
For one, the parade of good data marches on. This past week we saw initial jobless claims fall more than expected, to a seven-month low, while the Federal Reserve’s favorite inflation gauge of core personal consumption expenditures was in line. The Bureau of Economic Analysis’s second-quarter estimate for real gross-domestic-product growth in the third quarter at 2.8% matched expectations.
Strategists think that will continue.
Looking ahead to the coming year, J.P. Morgan’s head of global markets strategy, Dubravko Lakos-Bujas, predicts the U.S. will “remain the global growth engine with the business cycle in expansion, healthy labor market, broadening of artificial-intelligence-related capital spending, and prospect of robust capital market and deal activity.”
Indeed, although Dell Technologies and HP Inc. delivered lackluster earnings late Tuesday, the third-quarter reporting season was a solid one for Big Tech, and analysts have raised their earnings estimates for both the fourth quarter and 2025 for key players Nvidia, Alphabet, Amazon.com, and Meta Platforms.
Likewise, new stock debuts point to more gains. “The pace of U.S. initial public offerings has been an excellent predictor of market tops, and by that measure we may be at least a year or two away from highs on the S&P 500,” writes DataTrek co-founder Nicholas Colas.
The only thing he sees spoiling the party is the potential need for the Fed to raise interest rates to combat inflation again—the buzzkill that ended the dot-com bubble—though we’re nowhere near that level of froth, and it isn’t his base-case scenario.
The newly proposed tariffs on key trading partners like Mexico and China would appear to increase the chance of inflation, but so far that hasn’t bothered the market, which “simply...doesn’t believe Trump will follow through with them,” as Sevens Report President Tom Essaye puts it.
Either way, that’s a question for 2025. Markets are likely to remain in a celebratory mood in December, clearing the way for a Santa rally. After all, years that start as strongly as 2024 did in the first quarter and the first half almost always end with a bang. No turkey comas here.
Write to Teresa Rivas at teresa.rivas@barrons.com