US Market Insights (2-6 Dec): Fresh All-Time Highs Incoming?

• The $.SPX(.SPX)$ and $.SPX(.SPX)$ returned 1.08% and 0.75%, respectively.

• Major movers include $NVIDIA Corp(NVDA)$ (-2.6%), $Tesla Motors(TSLA)$ (-2.1%), $Oracle(ORCL)$ (-3.1%), $Salesforce.com(CRM)$ (-3.5%), $Autodesk(ADSK)$ (-9.1%), $CrowdStrike Holdings, Inc.(CRWD)$ (-7.1%), $Apple(AAPL)$ (+3.3%), $Amazon.com(AMZN)$ (+5.5%), $Microsoft(MSFT)$ (+1.6%), and $Eli Lilly(LLY)$ (+6.3%).

• Key economic data this week includes the Manufacturing PMI on Monday, JOLTS on Tuesday, ADP Non-Farm Employment and Services PMI on Wednesday, Unemployment Claims on Thursday, and Nonfarm Payrolls on Friday.

Things You Should Know Before Starting Your Week:

1) December Seasonality May Help the $.SPX(.SPX)$ End the Year Higher

Good December Seasonality: December generally sees an average increase of 1.3%, with gains occurring 83% of the time during election years.

Source: Carson Investment Research

Widening Market Breadth: The $.SPX(.SPX)$ gained 5.87% in November, with all sectors showing price increases. This suggests that market breadth is widening, which should help support the S&P 500 in December.

2) US Stocks Typically Up 8% After Back-to-Back >20% Yearly Returns

The $.SPX(.SPX)$ is up 28% year-to-date in 2024, making it likely that this will be the second consecutive year with a return above 20%.

Since 1927, when the S&P 500 has posted two consecutive yearly returns above 20%:

• 67% of the time, the S&P 500 has delivered a positive return in the following year.

• The average return for the following year is 8%.

3) Analysts Are Revising Up the 2025 S&P 500 Target Price

• One reason for the recent market rally is that analysts are providing an optimistic outlook for 2025.

• Analysts from various firms have set a consensus S&P 500 target price of 6,622, which represents a 10% upside relative to the S&P 500's closing price of 6,032 at the end of November 2024.

4) US Stock Market Continues to Attract the Most Fund Flows

• Despite uncertainties over Trump’s economic policies and tariffs, the US equity market has continued to attract the most fund flows over the past month compared to Europe and emerging markets, according to EPFR data compiled by Barclays.

Conclusion:

• With the Q3 earnings season nearly complete, market participants have shifted their focus to employment, inflation, economic growth, and Trump's tariffs and economic policies.

• The VIX has recently dropped to 13.46, a level last seen in mid-July, indicating that market participants are not overly concerned about record highs in the US equity market or elevated valuations.

• I remain optimistic about the US equity market, which appears poised for a December rally driven by optimism around Trump’s policies, expected earnings growth in 2025, and potential rate cuts.

• We may see indiscriminate buying across all sectors this month, as both institutional and retail investors, who may still be underinvested, look to reposition themselves and catch up with benchmark performance.

• Investors can capture market returns by investing in S&P 500 ETFs (SPY $SPDR S&P 500 ETF Trust(SPY)$ , IVV $iShares Core S&P 500 ETF(IVV)$ , VOO $Vanguard S&P 500 ETF(VOO)$ ) and the Nasdaq-100 (QQQ $Invesco QQQ(QQQ)$ ).

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