With the Thanksgiving Holiday occurring next week we wanted to take a moment to express our gratitude to all our readers and subscribers. We are especially thankful for our loyal long-time members. Thank you for entrusting us with helping you manage your family’s wealth and portfolios. We also appreciate many of you taking the time to join us every month on our member’s only webinar. We look forward to the Q&A session where we get to hear what’s on your mind and what concerns you. That exchange of ideas is invaluable to us. We wish you all a happy and healthy holiday season.
Before we dive into this month’s outlook we wanted to share a few publication notes. As you can see, we are publishing the December Outlook today instead of the usual time on the last Thursday of the month as that is Thanksgiving this November. Next week we will publish the December Almanac on Tuesday ahead of the holiday.
December Schedule:
• Monthly member’s only webinar December 4
• ETF Issue December 5
• Stocks Issue December 12
• 2025 Annual Forecast/January Outlook December 19
• Free Lunch Stock Picks December 21
• January Almanac December 23
• Office Closed December 24 to January 1
(Unless there is a major market or world event that warrants a Special Report)
Well, late October proved to be a great time to buy stocks once again and the post-election rally was even more powerful than we anticipated. The expeditious election decision was clearly a relief for Wall Street, which added to the bullish seasonal forces and macro trends. The brief consolidation that followed mid-month was attributed to many things by market pundits, but it sure lined up well with our typical November chart, especially the election-year November seasonal pattern.
This seasonal mid-November weakness sets up the usual yearend run and reaffirms 2024 is set to exceed our
2024 Annual Forecast best case scenario. We expect more new all-time highs before yearend. We expect the Russell 2000 index of small cap stocks to finally eclipse its November 8, 2021, closing highwater mark and log its first new all-time high in over 3 years. It was within striking distance of this level intraday a few times during the week after the election. This would be a bullish sign for us as this would suggest a further broadening of the bull market that has just entered its third year.
As the S&P 500 and NASDAQ Composite are on pace to log their second year in a row of greater than 20% gains, we’ve brought back the earlier version of our S&P 500 Election Year Seasonal Pattern. We’ve removed the negative “Open Field’ line and put back the “Sitting President” line. Even though sitting President Biden bowed out the fact that President-elect Trump was president before makes this election year unique with Mr. Trump being a pseudo sitting president.
S&P 500 currently sits right at the upper level of our Annual Forecast best case scenario range of 15-25%. 2024’s performance to date even exceeds the “Top Q1 Election Years” line. At this juncture we would not be surprised if the market outperformed the average December and ended up tacking on another 4-5% or more, pushing the index over 6200 for the year or upwards of a 30% gain for 2024. This also reinforces the fact that the current 4-Year Presidential Election Stock Market Cycle remains on track and intact.
We will go deeper into the prospects for next year in our 2025 Annual Forecast released on December 19 and update the 2025 Outlook in the 2025 Stock Trader’s Almanac on pages 10-11. That was written over five months ago before President Biden dropped out of the race. However, it still appears to be valid. As you can see in the 4-Year Cycle Chart above post-election years have been much better in the post-WWII era.
Trump 2.0
A lot has happened since the election. The Trump team has been moving fast with cabinet picks that promise to shake up the status quo. It remains to be seen how many actually take office. Matt Gaetz withdrew himself from consideration to run the Justice Department. Others may not make it as well, but many likely will. So, the debate on The Street has been how the second Trump administration will impact the markets, the economy and the global stage. Wall Street’s initial response has been favorable with the S&P 500 posting its biggest one-day gain (+2.5%) in two years on the day after the election.
From our experience we know that all presidents come short of delivering on most of their campaign promises. Even though Mr. Trump comes from an unorthodox background for a president and has a history of being a disrupter, the intrenched bureaucracy of Washington DC and government in general will likely prevent him from doing all he has said he will do. Giving him the benefit of the doubt we would say at best he will be able to accomplish 50% of his campaign promises.
In reality, he will have only two years to implement his agenda and policy initiatives before the midterm elections. This suggests that the Trump administration (and the Republican Congress) will hit the ground running, in fact they already have. This tendency of more conservative presidents to implement their agendas quickly drives the “Post-Election Year Performance By Party” stats on page 28 of the 2025 Almanac that show post-election years are worse for republicans while midterm years are worse for democrats. Though the recent history is more favorable for republican post-election years, including the 25.1% gain in 2017, Trump’s first post-election year.
Then there’s the question of whether 2025 is the fifth year of a Trump presidency or more like a first year. Despite what he learned in his first term he will be hard-pressed to steamroll his agenda through the intrenched bureaucracy of DC. And if his string of cabinet picks is any indication, Trump 2.0 promises to be much different than his first term.
Many of his policies will be supportive of the market and business and likely stir the animal spirits. He may not have the burden of needing to appease the country to shore up his reelection bid, but its pretty clear he would like to leave a legacy of economic prosperity, a powerful bull market and global stability. We expect there will be successes and missteps that will result in a choppy, yet positive post-election year with market gains in the 8-12% range.
December Docket & Outlook
While we expect above average gains for December and more new all-time highs, the month opens a little soft with zero clearly bullish days in the first week of the month often attributed to tax loss selling. This in turn sets up the early “January Effect” when small cap stocks tend to outperform large caps over the last two weeks of the year into mid-January. (Perhaps this is when the Russell 2000 will log its first new all-time high in three years.)
Our Free Lunch strategy (2025 STA p 116) targets early-December tax-loss selling and year-end seasonal strength. The Free Lunch Basket will be compiled after the close on December 20, 2024, AKA Quadruple Witching Day, and emailed to subscribers over the weekend on Saturday, December 21.
November is the first month of the Best Six Months of the year and the Best Three Months Span and so far, so good. December is the third best month of the year for DJIA, S&P and NASDAQ and #2 for Russell 2000 and yearend is frequently when the market hits new highs.
And of course, there’s the “Santa Claus Rally,” (2025 STA p 118) invented and named by Yale Hirsch in 1972 in the Almanac. Often confused with any Q4 rally, it is defined as the short, sweet rally that covers the last five trading days of the year and the first two trading days of the New Year. Yale also coined the phrase: “If Santa Claus should fail to call, bears may come to Broad and Wall.” This is the first leg of our January Indicator Trifecta (2025 STA p 20) which includes the “First Five Days” (2025 STA p 16) and the full month “January Barometer” (2025 STA p 18), also invented and named by Yale Hirsch in 1972. This January Trifecta helps us affirm or readjust our outlook. When we hit this Trifecta and all three are positive S&P is up 90.6% of the time with an average gain of 17.7%.
Pulse of the Market
Post Election Day market exuberance that fueled DJIA’s surge to new all-time highs above 44,000 has faded (1) and DJIA has modestly retreated over the past week and a half. Despite the recent pullback, DJIA remains on track for solid full-month November gains. As of today’s close, (November 21), DJIA is up 5.0% with five trading days to go. For the year, DJIA is up a respectable 16.4% with more likely as DJIA remains in an uptrend even though volatility has increased. DJIA is above its 50- and 200-day moving averages and all three point toward higher levels.
At the start of trading today, both the faster and slower moving MACD indicators applied to DJIA were negative (2), confirming the recent loss of positive momentum. Today’s gains have begun to reverse the negative signal on both MACD indicators. Should the typical year-end holiday cheer kick in and hold, both MACD indicators will also likely turn positive once again soon.
After climbing higher during 9 of 10 weeks beginning in mid-August, DJIA (3) ran into trouble in late October and traded lower in three of the last four weeks. DJIA also logged its sixth Down Friday/Down Monday (DF/DM) earlier this week with a mild Monday decline. Historically, DF/DM’s have had negative implications, but given the relatively few observed this year and DJIA’s performance following them this year, it will likely shake off this most recent one. It is encouraging that DJIA has already recovered the ground lost during and immediately after this week’s DF/DM.
S&P 500 (4) and NASDAQ (5) also sustained losses during late October and last week and, like DJIA, are also on track for a gain this week. As long as the gains hold and positive momentum builds, this would likely confirm the recent pullback from all-time highs was just a period of consolidation.
Weekly market breadth data has been consistent with the market’s weekly ups and downs over the last three weeks (6). NYSE Weekly Advancers outnumbered Weekly Decliners in positive weeks while Weekly Decliners were the majority during negative weeks. The magnitude of weekly swings is also well represented in weekly breadth data. Big weekly gains had sizable Weekly Advancers while sizable weekly losses produced a corresponding jump in weekly decliners. This suggests a reasonably healthy market that is likely to continue to trend higher in the near term with some additional chop.
Weekly New Highs remain an area of potential concern. DJIA, S&P 500, and NASDAQ all set new all-time closing highs after Election Day, but New Highs (7) did not eclipse their week ending September 20, peak. Perhaps it was the 10-year Treasury yield or the market positioning for a new administration in Washington. Whatever the case may be, a market breakout that includes more New Highs would alleviate any lingering concerns.
Short-term yields, measured by the 90-day Treasury bond (8), have continued to trend lower. This is expected as the Fed is in a rate-cutting cycle and did cut at its November meeting. But longer-dated yields and the 30-year Treasury are still trending higher. This could be due to a number of factors. Rising federal debt levels, the potential for higher economic growth, or simply because traders and investors are moving capital out of bonds and into stocks. The recent high yield for the 30-year Treasury bond was 4.77% back in April of this year. Should that level be approached again, it could give the stock market reason to pause and assess.
Click for larger graphic…