Stocks Climb the Wall of Worry in 2024
Year-to-date, Wall Street is enjoying one of its best presidential election years ever, with the S&P 500 Index up more than 26% in 2024. Per usual, the move seems more obvious than in hindsight than it was in real-time. For example, multiple geopolitical conflicts are occurring in Europe and the Middle East, interest rates remain at elevated levels, and many investors are concerned about valuations and wonder how much fuel the artificial intelligence buildout has left in the tank. That said, there are several reasons to remain bullish equities into year-end, including:
Presidential Election Year Seasonality
Historical seasonality trends have been a fantastic guide for investors. Though trading volumes tend to dip into the Thanksgiving holiday, stocks historically tend to grind higher into the end of November. Meanwhile, Ryan Detrick of Carson Research points out that, “No month is more likely to be higher than December in an election year.” Using data going back to 1950, the month of December is higher 83% of the time during presidential election years.
Broad Market Participation
A common bearish argument amongst Wall Street investors has been that there is a lack of broad participation, or breadth, in the market. However, the slim participation argument has been flipped on its head recently. For example, the Russell 2000 Index ETF ((IWM – Free Report) ) is up more than 12% in November and is finally approaching its all-time highs from 2021.
Image Source: TradingView
AI Spending Isn’t Slowing Down
Business spending on AI surged 500% this year to $13.8 billion, according to Menlo Ventures. Meanwhile, Zacks Consensus Estimates suggest that the future may even be brighter. Analysts anticipate that Nvidia’s ((NVDA – Free Report) ) earnings growth will ballon to 123.08% year-over-year.
Image Source: Zacks Investment Research
Year-End Window Dressing
Institutional investors often look to get winning stocks “on their books” and “window dress” their portfolios to make them look better when they send out year-end statements to clients. As a result, institutional investors may drive up 2024 winners like Coinbase ((COIN – Free Report) ), Tesla ((TSLA – Free Report) ), and Astera Labs ((ALAB – Free Report) ).
Nasdaq Breakout
The Nasdaq 100 ETF ((QQQ – Free Report) ) is on the verge of breaking out of a three-month base structure.
Image Source: TradingView
Bottom Line
Despite the stellar performance thus far in U.S. equities, several data points suggest that its not too late to get long stocks for an end of year rally.
