We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Historical Odds Favor Year-End Rally: Stocks to Watch
Once again, stocks finished the month of November on a strong note.
Despite a shortened trading week, the Thanksgiving holiday ended with some fireworks as all three major US indexes closed in positive territory. The S&P 500 and Dow Jones Industrial Average delivered weekly gains in excess of 1%, capping a robust month and finishing at fresh record highs.
Last Friday’s rally marked the best post-Thanksgiving move for the S&P 500 since 2012. The Nasdaq posted a similar weekly advance but remains just below its own all-time high.
On the month, the S&P 500 climbed 5.73%, while the Nasdaq rose an impressive 6.21%. But it’s the Dow that’s been outperforming, as the major industrial average soared 7.54% in November. Even better, the Russell 2000 surged 10.8% as small-caps respond favorably to the idea of deregulation under a second Trump administration.
We’re seeing clear signs of sector rotation. Certain pockets of the market are returning to the forefront (namely financials and industrials), while others have taken a backseat. Tech stocks have undoubtedly led this bull market since its start more than two years ago, but they’ve been mainly lagging in this new post-election era, in part due to weakness in semiconductor stocks.
While the third-quarter earnings season has wound down, market participants will still receive a number of big-time reports this week including the likes of Marvell Technology and Lululemon, to name a few.
Seasonality Supports More Gains in December
Stocks have climbed higher 9 out of the past 10 times in December during election years. Needless to say, those are pretty good odds.
Since 1950, the month of December ranks third-best for the Dow and S&P 500, averaging gains of 1.6% and 1.5%, respectively. It’s the third-best month as well for the Nasdaq (since 1971) and second-best for the Russell 2000 (since 1979).
We rarely see big declines in the Christmas-themed month; the last large monthly loss was in 2018, which was the worst December performance for the Dow since 1931.
When markets have experienced fantastic gains leading up to December (as was the case this year), stocks usually consolidate in the first half of the month. This is mainly due to profit-taking and the implementation of tax harvesting strategies by institutions.
On a brighter note, no other month is likely to be positive in election years, with the S&P 500 higher more than 83% of the time since 1950. And with substantial gains heading into December, a year-end rally is quite possible. The past 10 instances in which the S&P 500 was up at least 20% going into December, the final month of the year was up 9/10 times with an average gain of 2.4%:
Data Indicative of Resilient Economy
American consumers continue to pull out their wallets. Black Friday sales grew at a quicker pace in the US this year; retail sales rose 3.4% according to Mastercard SpendingPulse, outpacing last year’s figure. Online sales surged 14.6% as e-commerce growth dominates shopping trends. The trend resumed on Cyber Monday, when Americans spent $13.3 billion online – a 7.3% jump relative to the same day in 2023.
Meanwhile, the underlying inflation trend has stalled a bit but remains on a downward trajectory. Last week, we learned that the minutes from the Fed’s November meeting showed officials preferred a gradual pace of interest rate cuts and will remain dependent on incoming data.
“Participants anticipated that if the data came in about as expected, with inflation continuing to move down sustainably to 2% and the economy remaining near maximum employment, it would likely be appropriate to move gradually toward a more neutral stance of policy over time,” the minutes read.
Markets are pricing in a roughly 80% chance of a 25-basis point cut at the upcoming meeting.
The core Personal Consumption Expenditures (PCE) index, which strips out volatile food and energy components, rose 0.3% in October from the prior month, in line with expectations. On an annual basis, core prices rose 2.8%, also meeting estimates.
In terms of economic growth, the second estimate of third-quarter GDP was unchanged, showing the US economy grew at an annualized pace of 2.8% during the period.
And the jobs market has held up well despite some signs of cooling. The number of Americans filing for first-time unemployment benefits moved lower to 213,000 for the week ending November 23rd, down from 215k during the prior week. We’ll get the November employment report on Friday, which is expected to show the US economy added 214,000 jobs last month.
Stocks to Watch in December
Payment service provider Block saw its shares hit a 52-week high on Monday following the heavy shopping weekend. Sellers using Block’s suite of products broke records with 144 million global consumer transactions, a 17% improvement versus last year. Block stock, a Zacks Rank #3 (Hold), has been underperforming this year with an 18.5% return.
Cloud computing and retail giant Amazon held its Black Friday and Cyber Monday holiday shopping event from November 21st through December 2nd, and it turned out to be the largest in the company’s history. The event witnessed record sales along with the highest number of items sold. Devices such as the Amazon Echo and Fire TV were two of the best-selling products. Amazon stock is a Zacks Rank #2 (Buy) and has been outperforming the market, up nearly 40% this year.
Electric vehicle maker Tesla saw its stock decline on Tuesday after a Delaware judge blocked CEO Elon Musk’s massive compensation package for the second time this year. Tesla is likely to file an appeal based on the fact that the package was approved by shareholders by an overwhelming majority. Tesla stock is a Zacks Rank #1 (Strong Buy) and broke out in November. Shares are up better than 40% year-to-date.
Bottom Line
The S&P 500 is up more than 25% this year through November. If we finish in this territory, it would be the first time since 1998-99 that the benchmark index rose 20% or more in consecutive years.
With many stocks somewhat extended here, it simply doesn’t make much sense to get too aggressive into the end of the year. As discussed, the beginning of the month can be a bit of a lull, particularly when we’ve had a strong year.
But things then tend to pick up in the latter half of the month. And from a historical perspective, prospects of a year-end rally appear enticing. Make sure you’re taking advantage of all that Zacks has to offer as markets look to close out a banner 2024 on a positive note.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Zacks Investment Ideas feature highlights: Marvell Technology, Lululemon, Block, Amazon and Tesla
For Immediate Release
Chicago, IL – December 4, 2024 – Today, Zacks Investment Ideas feature highlights Marvell Technology (MRVL - Free Report) , Lululemon (LULU - Free Report) , Block (SQ - Free Report) , Amazon (AMZN - Free Report) and Tesla (TSLA - Free Report) .
Historical Odds Favor Year-End Rally: Stocks to Watch
Once again, stocks finished the month of November on a strong note.
Despite a shortened trading week, the Thanksgiving holiday ended with some fireworks as all three major US indexes closed in positive territory. The S&P 500 and Dow Jones Industrial Average delivered weekly gains in excess of 1%, capping a robust month and finishing at fresh record highs.
Last Friday’s rally marked the best post-Thanksgiving move for the S&P 500 since 2012. The Nasdaq posted a similar weekly advance but remains just below its own all-time high.
On the month, the S&P 500 climbed 5.73%, while the Nasdaq rose an impressive 6.21%. But it’s the Dow that’s been outperforming, as the major industrial average soared 7.54% in November. Even better, the Russell 2000 surged 10.8% as small-caps respond favorably to the idea of deregulation under a second Trump administration.
We’re seeing clear signs of sector rotation. Certain pockets of the market are returning to the forefront (namely financials and industrials), while others have taken a backseat. Tech stocks have undoubtedly led this bull market since its start more than two years ago, but they’ve been mainly lagging in this new post-election era, in part due to weakness in semiconductor stocks.
While the third-quarter earnings season has wound down, market participants will still receive a number of big-time reports this week including the likes of Marvell Technology and Lululemon, to name a few.
Seasonality Supports More Gains in December
Stocks have climbed higher 9 out of the past 10 times in December during election years. Needless to say, those are pretty good odds.
Since 1950, the month of December ranks third-best for the Dow and S&P 500, averaging gains of 1.6% and 1.5%, respectively. It’s the third-best month as well for the Nasdaq (since 1971) and second-best for the Russell 2000 (since 1979).
We rarely see big declines in the Christmas-themed month; the last large monthly loss was in 2018, which was the worst December performance for the Dow since 1931.
When markets have experienced fantastic gains leading up to December (as was the case this year), stocks usually consolidate in the first half of the month. This is mainly due to profit-taking and the implementation of tax harvesting strategies by institutions.
On a brighter note, no other month is likely to be positive in election years, with the S&P 500 higher more than 83% of the time since 1950. And with substantial gains heading into December, a year-end rally is quite possible. The past 10 instances in which the S&P 500 was up at least 20% going into December, the final month of the year was up 9/10 times with an average gain of 2.4%:
Data Indicative of Resilient Economy
American consumers continue to pull out their wallets. Black Friday sales grew at a quicker pace in the US this year; retail sales rose 3.4% according to Mastercard SpendingPulse, outpacing last year’s figure. Online sales surged 14.6% as e-commerce growth dominates shopping trends. The trend resumed on Cyber Monday, when Americans spent $13.3 billion online – a 7.3% jump relative to the same day in 2023.
Meanwhile, the underlying inflation trend has stalled a bit but remains on a downward trajectory. Last week, we learned that the minutes from the Fed’s November meeting showed officials preferred a gradual pace of interest rate cuts and will remain dependent on incoming data.
“Participants anticipated that if the data came in about as expected, with inflation continuing to move down sustainably to 2% and the economy remaining near maximum employment, it would likely be appropriate to move gradually toward a more neutral stance of policy over time,” the minutes read.
Markets are pricing in a roughly 80% chance of a 25-basis point cut at the upcoming meeting.
The core Personal Consumption Expenditures (PCE) index, which strips out volatile food and energy components, rose 0.3% in October from the prior month, in line with expectations. On an annual basis, core prices rose 2.8%, also meeting estimates.
In terms of economic growth, the second estimate of third-quarter GDP was unchanged, showing the US economy grew at an annualized pace of 2.8% during the period.
And the jobs market has held up well despite some signs of cooling. The number of Americans filing for first-time unemployment benefits moved lower to 213,000 for the week ending November 23rd, down from 215k during the prior week. We’ll get the November employment report on Friday, which is expected to show the US economy added 214,000 jobs last month.
Stocks to Watch in December
Payment service provider Block saw its shares hit a 52-week high on Monday following the heavy shopping weekend. Sellers using Block’s suite of products broke records with 144 million global consumer transactions, a 17% improvement versus last year. Block stock, a Zacks Rank #3 (Hold), has been underperforming this year with an 18.5% return.
Cloud computing and retail giant Amazon held its Black Friday and Cyber Monday holiday shopping event from November 21st through December 2nd, and it turned out to be the largest in the company’s history. The event witnessed record sales along with the highest number of items sold. Devices such as the Amazon Echo and Fire TV were two of the best-selling products. Amazon stock is a Zacks Rank #2 (Buy) and has been outperforming the market, up nearly 40% this year.
Electric vehicle maker Tesla saw its stock decline on Tuesday after a Delaware judge blocked CEO Elon Musk’s massive compensation package for the second time this year. Tesla is likely to file an appeal based on the fact that the package was approved by shareholders by an overwhelming majority. Tesla stock is a Zacks Rank #1 (Strong Buy) and broke out in November. Shares are up better than 40% year-to-date.
Bottom Line
The S&P 500 is up more than 25% this year through November. If we finish in this territory, it would be the first time since 1998-99 that the benchmark index rose 20% or more in consecutive years.
With many stocks somewhat extended here, it simply doesn’t make much sense to get too aggressive into the end of the year. As discussed, the beginning of the month can be a bit of a lull, particularly when we’ve had a strong year.
But things then tend to pick up in the latter half of the month. And from a historical perspective, prospects of a year-end rally appear enticing. Make sure you’re taking advantage of all that Zacks has to offer as markets look to close out a banner 2024 on a positive note.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.