If you ask Goldman’s Scott Rubner, the S&P’s likely to hit 6,200 by year-end, and who knows, maybe 7,000 before next summer.
This is, he reminded market participants, the “best seasonal period of the year for US equities,” and the retail crowd’s pretty fired up, as evidenced by, for example, manic gains in crypto.
If you’re curious, it’s actually “normal” for US shares to consolidate right about now. The figures below show you the seasonal looking back a century, with the consolidation shaded in yellow.
The year-end rally typically starts this week, Rubner noted, adding that once the turkey’s gone, the serious investors will “return to their Bloomberg terminals with 20 days” left to trade on December 2. During election years, he went on, the rally generally runs into January, and fades “right before Inauguration Day.”
As most readers are aware, US equities have seen a veritable deluge of inflows over the past several weeks. I’ve documented that extensively, most recently in “MAGAFOMOTINA.” Last week’s inflow to US-focused equity ETFs and mutual funds was the seventh consecutive and the ninth in 10.
The figure below, from Goldman, uses the same EPFR data to give you some historical context for the three-month rolling influx.
We’re currently witnessing the biggest three-month wave since 2021’s “stimmy”-fueled “everything bubble,” and as Rubner remarked, November could end up being “one of the largest monthly inflows on record for US stocks.” Note also that US shares are tracking for $450 billion of inflows for 2024, the most for any full year, bar none.
January, Rubner emphasized, in the same note, is the best month of the year for US equity inflows historically, and “after two 20%+ years for the S&P,” it’s possible that anyone still on the sidelines could get stopped in.
Ultimately, Scott’s message was straightforward. “I don’t think many will be eating turkey on Thursday and then shorting the S&P,” he wrote. “Good years tend to follow more good years for US equities, and January is when capital gets deployed from the largest asset base.”
By his own account, Rubner went ahead and “placed an order for an SPX 7K hat.” I wonder if it was made in China.
We sure have discounted a lot of good news well before inauguration day and all the promises of “on day one’.
The widening of the rally can be taken as a strong sign. Or as a last hurrah sort of thing. Who knows?
Where’s the moderating voice of Scott Bessent?
From Marketwatch tonight: ““On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders,”
Uh, aren’t Canada and Mexico part of the successor treaty to NAFTA?
Yeah, but that was negotiated by some guy who wasn’t very smart. The new guy is going to make that old guy look like an idiot.
Maybe I’m the gullible one for thinking that Trump and his appointees will actually do what they are promising to do, but maybe the market is mistaken in thinking they will not.
I just don’t see how 60% and 20% tariffs on our biggest trading partners, 10% on everyone else, and the retaliation to follow, won’t snarl supply chains and drive inflation higher, followed by depressed demand and slumping unit sales. I don’t see how driving several million workers into hiding or out of the country won’t disrupt industries and drive inflation higher. I don’t see how slashing federal payrolls and disrupting federal funds to states won’t drive unemployment higher. I don’t see how rolling back health care coverage, NIH research, renewable energy subsidies, etc won’t have their own deleterious effects. I don’t see how cutting corporate tax rates and rolling back antitrust won’t simply result in more buybacks and M&A followed by synergy-driven RIFs rather than productive investment.
I’m willing to entertain the notion that, in the long run, all this might eventually lead to some positives – you know, when red-blooded native born Americans are fully employed as farmworkers, day laborers, elder carers, meatpackers, garment workers, and other desirable professions, and all our goods are affordably made, grown, mined, stitched in America again. Maybe?
But how many equity investors give two whits about the long run? We have to get through the short and medium run. And I just struggle to see the economic positives of these policies, in the short-medium term. (A list of those positives would be very helpful for me to read. My mind needs expanding.)
So either my understanding of how the economy works is completely wrong, or Trump and his zealots don’t actually mean most of what they say, or the (equity) market is being led off a cliff by animal sprits and big inflows that can reverse as quickly as they came. When is the reckoning? I don’t know but the rubber meets the road on Jan 20.
The equity markets always love a carrot on a stick.
What percentage of Mexican and Canadian industrial exports
to the US are being made by US companies who moved production
across the border to boost shareholder returns? Those tariffs would be GREAT for corporate profits!!
I’m sure Musk knows . .. that TSLA does not build cars/components in Mexico but his competitors do.
JL – don’t leave eldercare workers off of your list. I read that about a third giving care now are immigrants, legal and illegal. How much will you have to pay for a nice white caregiver who can pass a drug and background check? But older voters did not vote for Trump, right?
On another note, pundits who choose to overlook the embarrassing racist vote suggest that inflation drove voters to Trump. Putting tariffs on Mexican produce and Canadian wheat and oilseeds will sure help there! Trump, however, did quietly suggest that there would be a “carve out” for Canadian oil and gas.
I assume, if Trump actually follows through with tariff’ing Canada and Mexico, that companies and industries he likes will get exempted. Oil & gas for sure (US refining industry cannot function w/o Canadian oil). Maybe autos (to keep his UAW support – but not if Musk prevails), lumber (build baby build).
He already promised 100% tariffs on autos from Mexico, saying it would benefit US auto workers.