The Christmas holiday period is the perfect time for the so-called Santa Claus rally. Many market players believe that the exciting sustained rise in the stock market at the end of 2023 will bring companies hefty profits.
According to estimates, the stock market growth has great upside potential. Since early December, the S&P 500 has soared by 4%. Moreover, it is likely to extend its winning streak. The index closed out 2023 with an impressive 24% gain but lacked only 1% to hit a new all-time high.
The short-term outlook remains bullish, experts assume. Data from the Stock Trader's Almanac showed that the S&P 500 index added 1.3% on average in the last five days of December and the first two days of January. The rally was driven by increased buying activity before the new year following tax-related sales.
The US Federal Reserve’s monetary policy plays a critical role in shaping dynamics in the stock market. The regulator has recently surprised investors by signaling the end of its unprecedented tightening cycle. This prompted expectations of rate cuts in 2024, which were heightened by signs of cooling inflation. Recent data showed that the US personal consumption expenditures (PCE) price index fell below 3% in November.
The current dovish shift from the Fed supports the market and contributes to a more positive mood. Against this background, there has been a surge in buying among retail investors over the past 4-6 weeks, with many of them opting to invest in riskier stocks.