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After Big Gains, Is a "Santa Claus Rally" Possible?
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We embark on a holiday-shortened trading week this Tuesday — Happy Holidays, all! — feeling a little sleepy still; we don’t expect high trading volume today or through the end of the year, per normal seasonality. That said, this time period would constitute a “Santa Claus Rally,” should indices continue to climb higher. This may be a tall order; in just the S&P 500 alone, 10 of the past 13 trading days have moved higher, and it’s +732 points from late-October lows.
The S&P only spent a very short time in the red in 2023 — way back in early January. It took a few months after this to gain some traction, but once the rising tide of A.I. business began to lift all boats (with technology interests), we were off to the races. With only four trading days left, the S&P is above +25% for the year, only slightly below the robust 2021 year of the Great Reopening, and a nice bounce-back from -18% from 2022. Over the past 10 years, the S&P has averaged +14% gains.
What’s expected for 2024? Clearly more good things, although some market participants feel some of the good news in the next year is already being priced into the market currently. Although the current expectation is for three interest rate cuts in the coming 12 months, the Fed has not promised anyone these cuts will be coming any sooner than this summer. Data dependency will be key, but strong economic prints going forward will likely put Fed rate cuts on the back burner.
Case-Shiller Home Prices for October have just come out this morning, with +5.7% on the 10-city survey, +4.9% on the 20-city — compared with +4.8% and +3.9%, respectively, the previous month. These are impressive numbers for the housing market, especially considering October 30-year fixed mortgage rates were at multi-decade highs, +8%. For last month, these rates have come down to sub-7%, so this would stand to reason that Case-Shiller numbers should remain strong a month from now.
Overall housing has indeed been challenged by high mortgage rates, and last week’s lower Existing Home Sales reflects this. (Pending Home Sales numbers for November will be out later this week.) But for October Case-Shiller numbers, the key is regionality: Detroit led home price gains, +8.1%, followed by +7.2% for San Diego and +7.1% for New York City. On the weak side, Portland, OR sale prices fell -0.6%.
Aside from more housing data this week, we’ll also get a look at inventory levels, trade balance and, of course, Weekly Jobless Claims. Jobs Week is next week, with JOLTS data, ADP (ADP - Free Report) private-sector payrolls and the big Employment Situation report a week from this Friday. That will also be a holiday-shortened trading week, with New Year’s Day coming next Monday.
Thus, any Santa Claus rally from here would likely be a resuming of bullish narratives followed over the past couple weeks. Which is fine, ultimately: even if we’re flat from here through the final week of trading for the year, it’s been a healthy 2023 overall. Questions or comments about this article and/or author? Click here>>
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After Big Gains, Is a "Santa Claus Rally" Possible?
We embark on a holiday-shortened trading week this Tuesday — Happy Holidays, all! — feeling a little sleepy still; we don’t expect high trading volume today or through the end of the year, per normal seasonality. That said, this time period would constitute a “Santa Claus Rally,” should indices continue to climb higher. This may be a tall order; in just the S&P 500 alone, 10 of the past 13 trading days have moved higher, and it’s +732 points from late-October lows.
The S&P only spent a very short time in the red in 2023 — way back in early January. It took a few months after this to gain some traction, but once the rising tide of A.I. business began to lift all boats (with technology interests), we were off to the races. With only four trading days left, the S&P is above +25% for the year, only slightly below the robust 2021 year of the Great Reopening, and a nice bounce-back from -18% from 2022. Over the past 10 years, the S&P has averaged +14% gains.
What’s expected for 2024? Clearly more good things, although some market participants feel some of the good news in the next year is already being priced into the market currently. Although the current expectation is for three interest rate cuts in the coming 12 months, the Fed has not promised anyone these cuts will be coming any sooner than this summer. Data dependency will be key, but strong economic prints going forward will likely put Fed rate cuts on the back burner.
Case-Shiller Home Prices for October have just come out this morning, with +5.7% on the 10-city survey, +4.9% on the 20-city — compared with +4.8% and +3.9%, respectively, the previous month. These are impressive numbers for the housing market, especially considering October 30-year fixed mortgage rates were at multi-decade highs, +8%. For last month, these rates have come down to sub-7%, so this would stand to reason that Case-Shiller numbers should remain strong a month from now.
Overall housing has indeed been challenged by high mortgage rates, and last week’s lower Existing Home Sales reflects this. (Pending Home Sales numbers for November will be out later this week.) But for October Case-Shiller numbers, the key is regionality: Detroit led home price gains, +8.1%, followed by +7.2% for San Diego and +7.1% for New York City. On the weak side, Portland, OR sale prices fell -0.6%.
Aside from more housing data this week, we’ll also get a look at inventory levels, trade balance and, of course, Weekly Jobless Claims. Jobs Week is next week, with JOLTS data, ADP (ADP - Free Report) private-sector payrolls and the big Employment Situation report a week from this Friday. That will also be a holiday-shortened trading week, with New Year’s Day coming next Monday.
Thus, any Santa Claus rally from here would likely be a resuming of bullish narratives followed over the past couple weeks. Which is fine, ultimately: even if we’re flat from here through the final week of trading for the year, it’s been a healthy 2023 overall.
Questions or comments about this article and/or author? Click here>>