Will this Post-Election Rally Last Through the End of 2024?

The conclusion of this year’s election catalyzed the ongoing stock rally—but will this momentum continue? Mitch offers his perspective. [Mitch on the Markets] Can the Post-Election Rally Last to the End of the Year? At the outset of 2024, most large banks were forecasting the S&P 500 Index to finish around 5,200, which would have implied a roughly 10% gain for the year. U.S. stocks had different plans. Bolstered by stronger-than-appreciated U.S. consumer spending, steady economic and earnings growth, declining inflation, and the Federal Reserve’s pivot to looser monetary policy, U.S. stocks have delivered a rally over double the magnitude of most expectations.1 The U.S. presidential election seems to have catalyzed the momentum. In the week following the election, the S&P 500 Index jumped +4.7% – the strongest week since October 2022. I’ve argued before that the ‘removal of uncertainty’ was a key driver of this short-term market strength, but I also think it’s fair to say the market was pricing-in hopes for lower taxes and lighter regulation, both of which could promote growth. The question for investors is, can this post-election rally continue through the end of the year? I think it can. --------------------------------------------------------------- [How to Make the Most of this Rally]( U.S. stocks have outpaced expectations in 2024, creating new opportunities for your retirement portfolio. Now’s the time to ensure your portfolio is positioned to capitalize on this momentum. However, creating a retirement portfolio that meets your financial requirements and can withstand any market can take a lot of work. That is why I’ve created, [7 Secrets to Building the Ultimate DIY Retirement Portfolio 2]( an exclusive guide that gives insight into the right way to set your goals and retirement needs. You’ll also get details on: - How to accurately establish your retirement income needs - The two phases of determining your asset allocation - Investing rules to help you avoid self-sabotage - Plus, our views on key steps to create and maintain the ultimate retirement portfolio If you have $500,000+ to invest, get our free [7 Secrets to Building the Ultimate DIY Retirement Portfolio 2]( guide today. --------------------------------------------------------------- The first factor I’d consider is seasonal. Looking back to 1950, December ranks as the second-best performance month for the S&P 500, with an average gain of 1.3%. But December is also the most consistently positive month, with the highest frequency of advances of any month with the lowest volatility (based on data since 1950). On average, gains have been broad-based, but small- and mid-caps have tended to outperform historically. Strong gains leading up to December have also ushered in a strong close to the year. In the last ten instances when the S&P 500 Index entered December up more than +20%, the final month saw an average gain of +2.4%. In this historical context, strong gains beget more strong gains. I also think the market could keep pricing-in major policy shifts as the new administration’s agenda comes into clearer focus. The prospect of sizable fiscal stimulus (tax cuts) into an economy that’s already growing roughly 2.5% to 3% could be a significant catalyst to growth, and it could also mean adding to an already historically large U.S. fiscal deficit. In my view, this could put upward pressure on long-duration U.S. Treasuries, which could finally un-invert and eventually steepen the yield curve (Fed rate cuts would also help). A steeper yield curve would arguably help Financials while also having the potential to stimulate more lending, an economic positive. The Yield Curve Could Steepen with Further Fed Cuts and Rising Long-Duration Treasury Yields [The Yield Curve Could Steepen with Further Fed Cuts and Rising Long-Duration Treasury Yields]( Source: Federal Reserve Bank of St. Louis 3 Finally, no commentary about the potential for more stock market appreciation would be complete without talking about earnings. 4 For the third quarter, total earnings for the S&P 500 index are expected to be up +8.1% from the same period last year on +5.7% higher revenues. If we exclude the volatile Energy sector, whose Q3 earnings were down -22.9% from the same period last year on -2.7% lower revenues, then earnings would have been up +10.6% on +6.3% higher revenues. This level of solid earnings growth has been present throughout 2024, and as seen on the chart below, is expected to accelerate in the new year: Quarterly Earnings and Revenue Growth (YoY) [Quarterly Earnings and Revenue Growth (YoY)]( A final point to make on earnings is that unlike the unusually high magnitude of estimate cuts we had seen ahead of the Q3 earnings season, estimates for Q4 are holding up a lot better, as the chart below shows. Heading into the final stretch, companies are feeling more confident about sales and earnings than they were previously. Evolution of 2024 Q4 Earnings Growth Estimates [Evolution of 2024 Q4 Earnings Growth Estimates]( Bottom Line for Investors I want to be clear that while I think stocks can continue to rally into the end of the year and early next, based on the factors laid out above, I am not suggesting they will rally. No one can truly predict what stocks will do in the short term, and downside volatility and/or a correction can occur at any time and for any reason. Thinking further ahead, I do think economic fundamentals remain supportive of higher equity prices, and earnings and economic growth could benefit from lower taxes and looser regulation. In other words, the ingredients for more equity market gains are present, it’s just a matter of whether the realities of those policies and growth will meet and/or exceed expectations. For now, I think they can. With these factors in mind, now is the ideal time to refine your retirement strategy. I’m offering our guide, [7 Secrets to Building the Ultimate DIY Retirement Portfolio.5]( This guide provides essential investing tips and insights to help you build a portfolio that aligns with your retirement goals, especially in uncertain times. You’ll have insights on: - How to accurately establish your retirement income needs - The two phases of determining your asset allocation - Investing rules to help you avoid self-sabotage - Plus, our views on key steps to create and maintain the ultimate retirement portfolio If you have $500,000 or more to invest, get this guide today! [Claim Your Free Report]( About Zacks Investment Management Zacks Investment Management was born out of one of the country’s largest providers of independent research, Zacks Investment Research. Our independent research capabilities from our parent company truly distinguish us from other wealth management firms - our strategies are derived from research and innovation, including the proprietary Zacks Rank stock selection model, earnings surprise and estimate revision factors. At Zacks Investment Management, we work with clients with $500,000 or more to invest, and we use this independent research, 35+ years of investment management experience, and tools we’ve developed to design customized investment portfolios based on each client’s individual needs. The end result is investment management that is research driven, results oriented and client focused. [Mitch on the Markets] Talk to a Zacks Wealth Advisor today. [Schedule Your Chat]( [facebook]( [linkedin]( [twitter]( © Zacks Investment Management | [Privacy Policy]( 1[Black Rock. November 20, 2024.]( 2 ZIM may amend or rescind the guide “7 Secrets to Building the Ultimate Retirement Portfolio” for any reason and at ZIM’s discretion. 3[Fred Economic Data. December 3, 2024.]( 4[Zacks.com. November 22, 2024.]( 5 ZIM may amend or rescind the guide “How to Build Your Ultimate Retirement Portfolio” for any reason and at ZIM’s discretion. DISCLOSURE Past performance is no guarantee of future results. 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