HomeMost PopularInvestingDecember Market Unpredictability: 5% Away from All-time High

December Market Unpredictability: 5% Away from All-time High

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The recent market rally has broadened beyond the β€œMagnificent 7,” lifting the Dow to a 52-week high, largely due to the strength in industrials and financials. With the Dow now less than 2% away from an all-time high, the broader market is showing signs of gathering momentum.

However, while there is optimism, we must be realistic about short-term returns, considering the strong market rally in November that followed an October correction.

Volatility and Market Prediction

Despite the VIX index hitting a low for the year, a slight selloff in stocks has led to a surge in volatility. While low volatility is typical in bull markets, it often precedes periods of high volatility. This presents an opportunity to consider hedging strategies, as it’s likely we will see some near-term weakness and a temporary rise in VIX.

December Market Expectations

In December, historical statistics show a bullish trend, especially in pre-election years, with the S&P 500 positive more than 72% of the time since 1950, and an average return of 2.9%. Additionally, the market’s recent performance and the historical precedent of strong monthly returns bode well for a continuation of the new bull market.

December FOMC Meeting and Fed’s Position

The upcoming FOMC meeting is expected to result in a rate pause, with the Fed signaling the end of the hiking cycle. This stance is reinforced by the 2-year low in the Fed’s preferred inflation gauge, prompting expectations of interest rate cuts in the coming year.

Stocks to Watch

While the general market trend is down, individual stocks like Royal Caribbean Cruises (RCL), Spotify (SPOT), and Coinbase (COIN) are outperforming the overall market, showing significant upward momentum.

Market Projections and Conclusion

The first half of December tends to be less dynamic, with the bulk of gains materializing later in the month. The recent strength in various sectors and suppressed inflation continue to support the case for a continued bull market.

As we move forward, investors should consider the historical trends, the current market dynamics, and potential company-specific opportunities to navigate through the December market unpredictability.

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