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Will Stocks Finish 2024 Strong? Bull vs. Bear Case

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Will Stocks be Higher into 2025?

Wall Street is complex, constantly changing, and challenging to predict. For these reasons, savvy investors understand that striving to lay out the bull and bear cases in a sober, unbiased fashion is important. However, simply laying out the bull and bear case is far from a panacea, and  some of the best and brightest investors understand the power of flexibility:

“You adapt, evolve, compete, or die.” ~ Paul Tudor Jones

“You always need to be flexible, bending like a tree in the wind.” ~ William O’Neil

“I change my mind a lot. I can be in love with something on Friday and short it on Wednesday.” ~ Stanley Druckenmiller

Today’s commentary will analyze five critical data points in the current market with an “if, then” mindset.

What Rate Cuts Mean for the Market

The Federal Reserve and monetary policy laid out by Chairman Jerome Powell is an integral market piece to understand. The Fed’s policy drives liquidity, and liquidity drives equities. Powell recently confirmed that the Fed will cut rates this month.

Will the Fed Cut Interest Rates by .25 or .5?

The first rate cut after a hiking cycle is typically bullish for equities. The Fed has cut interest rates 14 times since 1929. Of the 14 rate cuts, 12 instances resulted in the S&P 500 Index being higher a year after the first rate cut. However, the data says that investors should be concerned if the Fed shows panic and starts a rate cutting cycle with a .50% cut rather than a .25% cut. In both years the market was lower one year after the first cut (2001,2007), the Fed started with a 50bps cut.

Zacks Investment Research
Image Source: Zacks Investment Research

Though the jobs market is showing signs of softening, the CME FedWatch Tool gives the odds of a .25% rate cut at 71% and a .5% cut at only 29%.

200-Day Has Contained Tech Rally

Though value stocks like AT&T ((T - Free Report) ) and Altria ((MO - Free Report) ) have outperformed recently, the Nasdaq 100 ETF ((QQQ - Free Report) ) and big tech stocks like Nvidia ((NVDA - Free Report) ), Oracle ((ORCL - Free Report) ), and Microsoft ((MSFT - Free Report) ) have led the market.Because of this, market technicians should focus on QQQ.QQQ has held the 200-day moving average or the 40-week MA since March 2023. The analysis is simple: if QQQ continues to tend above the line it is bullish; below the line is bearish.

Zacks Investment Research
Image Source: TradingView

Market Cycle Analysis

According to InvesTech Research, the average bull market since the early 1930s has lasted nearly four years. Considering that the last bear market ended in late 2022, U.S. equities have ample runway into 2026 based on this metric.

Volatility Spikes Coincide with Generational Bottoms

The Volatility Index (VIX) is a fear gauge that displays Wall Street’s expectations for market turmoil. Spikes above $60 are very extreme and have only occurred three times in the past 30 years: October 2008 during The Global Financial Crisis, March 2020 during the COVID-19 Pandemic, and the beginning of last month when the “Yen Carry” unwound.

Zacks Investment Research
Image Source: Zacks Investment Research

In each spike above $60, stocks staged generational bottoms and were much higher a year later.

September Pullbacks are Normal

Markets have retreated for four straight Decembers.

Zacks Investment Research
Image Source: Zacks Investment Research

This September is no different. Nevertheless, September weakness has not led to a major correction in the past few years. In 2020, 2021, 2022, and 2023, the S&P 500 Index finished the year higher than the start of September.

Bottom Line

Investors should be flexible and keep an open mind about the market. Current metrics favor a continued bull market, but savvy investors prepare for either outcome.

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