S&P 500 Soars 30% in 2024, Eyes Santa Rally

Despite US stocks growing strongly this year, several analysts think a final push through the holidays is quite possible.

A Garland for the Year

The benchmark so far this year, a relatively uncommon and strong performance. This is particularly notable following the 24% gain last year, with consecutive rises of this magnitude occurring only three times in the past century. While this has left investors cautious that next year's performance won't live up to the high bar set by 2024, there still appears to be considerable optimism that the before the new year, thanks to the historic phenomenon of the Santa Claus rally.

Typically, the S&P 500 rises around 1.3% in the final week (and first two days) of the year, with experts citing a wide range of reasons, including institutional investors rebalancing their portfolios, tax moves, and a general sense of festive cheer during this period. Often, the market is driven by retail traders who tend to be more bullish, but this can also lead to more unpredictable market movements. Nevertheless, markets have risen 78% of the time over the last seventy years during this period, and analysts suggest that the upward trend for markets over the last year will continue through the holidays. As for , analysts point to solid economic data and earnings results seen recently, backed up by expected Fed rate cuts.​

Path Forward Hinges on Fed

Before the relatively calmer holiday period when the rally typically occurs, markets must navigate a jam-packed economic calendar next week, which includes the highly anticipated final FOMC meeting of the year. Economists and the market by 25 basis points and maintain rates through January, which could be communicated in the meeting's rhetoric. However, recent PPI data shows that t as wholesale prices remain elevated. This could prevent the Fed from providing the same level of easing bias the market expects, which would be a headwind for the S&P 500 before the end of the year.

Analysts suggest that the major if that hurdle is overcome. They cite the higher-than-expected number of jobs created in November, the best consumer sentiment reading in seven months, and the easing labour market conditions that smooth the path for easing. The recent pullbacks might set up a , as the larger-than-usual gains in the stock market this year could fuel a larger tax adjustment move that typically backs the year-end Santa rally.​

S&P 500 Range Signals Breakout

The S&P 500 trades in a bullish trend and above its key support at 6030, with prices hovering near the record high of 6100, suggesting room for further upside once the range resolves. The bounce off the support may lead to a breakout towards 6220 in 2025, measuring the last notable pullback from 6020 to 5830. An interim resistance lies at 6170 in the shorter term, which is projected using the most recent pullback from the peak to the bottom of the range. The short-term price action appears to be flattening out, offering little directional clues, though trading volumes might thin heading into the holiday period, breaking the double-top formation. Meanwhile, supports below the above-mentioned levels rest at 5960 and the golden pocket of the 5830-6100 leg at 5930.

Source: SpreadEx / SPX500

Key Takeaways

The S&P 500 index has soared nearly 30% so far in 2024, following a 24% gain in the previous year, with analysts expecting the Santa rally to add around 1.3% in the final week of the year on solid economic data, earnings results and the prospects of further easing. Before the cheerful holiday period begins, however, markets must face a rate-cutting Fed challenged by a recent rise in wholesale prices. This could prevent the bank from offering an easing bias, hindering the S&P 500's upside, but once it is overcome, the major index could hit new record highs.