Optimizing Your Portfolio as December Approaches

As we step into December 2024, the stock market is finding itself on an impressive trajectory, flirting with record highs. Investors are eager to see how this stellar year for U.S. stocks will be capped off. Last week’s holiday-shortened trading session saw the Dow Jones Industrial Average surge by over 2%, while the S&P 500 and Nasdaq Composite climbed more than 1%. Both the S&P 500 and Dow branched into uncharted territory by concluding November at all-time highs.

A Critical Week of Economic Insights

Looking ahead, investors are gearing up for a pivotal week filled with significant labor market data. The spotlight will be on the Bureau of Labor Statistics’ November jobs report, anticipated to be the week’s most consequential release. In addition, reports on job openings and private wage growth, along with updates on the services and manufacturing sector, will influence market sentiment.

Interest Rates: What to Expect

One of the focal points for investors will be the economic indicators that provide insight into the Federal Reserve’s stance on interest rates, with an announcement scheduled for December 18. Recent shifts in expectations for future rate cuts have reflected a combination of market dynamics and inflation concerns. As of the latest data, there is a 66% likelihood that the Fed will cut rates during its final meeting of the year. However, projections indicate that only two further cuts might occur in 2025.

The consensus is that a gradually slowing labor market is likely to keep the Fed vigilant over inflation, reducing the likelihood of aggressive rate cuts. The forthcoming November jobs report — expected to unveil an addition of around 200,000 jobs — will further illuminate this trend. Economists hope to see a rebound from October’s dismal figures, which were heavily influenced by temporary factors such as hurricanes and strikes.

Corporate Earnings to Watch

Investor attention will also shift to notable corporate earnings reports in the upcoming week from companies like Salesforce (CRM), Lululemon (LULU), and Okta (OKTA). These results will offer crucial insights into corporate health and economic resilience as they echo broader market trends.

A Bullish Outlook for 2025

Wall Street strategists have released optimistic forecasts for 2025, suggesting that the S&P 500 could range between 6,400 and 7,000. Many are betting on a broadening market rally, moving beyond the "Magnificent Seven" tech stocks — including giants like Apple (AAPL), Microsoft (MSFT), and Amazon (AMZN) — towards enhancing performance across other sectors of the index. RBC Capital Markets emphasizes a transition towards more value-oriented stocks, buoyed by sustained economic growth.

Conversely, not all experts agree that this shift will be smooth. Barclays suggests that as long as Big Tech continues to lead in earnings, these stalwarts will remain critical drivers of S&P 500 growth. Indeed, recent analyses have shown that earnings revisions for big tech firms remain more favorable compared to other segments of the S&P 500.

Momentum as Year-End Approaches

As December unfolds, historical trends bolster the argument for a continued bullish market. Notably, since 1985, market strength in entering December has often led to further gains, with the S&P 500 rising in 90% of cases when it has rallied over 20% prior to this month.

Ryan Detrick from Carson Group reminds investors that “strength often begets strength,” and historical data suggests a year-end rally is not just possible, but highly probable. This is an excellent reminder for investors to remain strategic and consider positioning their portfolios to capture this potential momentum.

Weekly Economic Calendar Highlights

Here’s what to look out for in the upcoming week:

Monday:

• Economic data:
  • S&P Global US Manufacturing PMI
  • Construction Spending
  • ISM Manufacturing

Tuesday:

• Job Openings, October: Predicted at 7.51 million
• Earnings: Salesforce (CRM), Okta (OKTA)

Wednesday:

• Earnings: A plethora of retail and consumer companies will report, including American Eagle Outfitters and Chewy.

Friday:

• Key Economic Calendar: Employment Report, with expectations of significant job additions and a slight uptick in the unemployment rate.

As we navigate the final month of 2024, aligning your investment strategy with market trends, corporate earnings, and economic signals can place you in a prime position for success.

Stay ahead of the curve with your investments by keeping an eye on these economic indicators and market movements, ensuring that your portfolio reflects both resilience and adaptability in this dynamic environment.