Have the bears gone into hibernation?
Stocks held up pretty well Thursday despite disappointing outlooks from Dow components Cisco and Walmart. The market is on a tear this month.
Uninspiring outlooks from market bellwethers Cisco and Walmart weren’t enough to put a dent into this impressive November rally on Thursday. The major market indexes were all flat/down only slightly, despite big gains earlier this week. It seems that investors were, to quote Travis Kelce’s girlfriend, shaking it off.
Sure, the haters (bears) are still gonna hate, hate, hate, hate, hate. But traders right now are cheering the fact that inflation pressures are continuing to subside. That likely means the Federal Reserve is done raising interest rates during this cycle. It’s probably no longer accurate to call this a pause. It’s more likely a stop. Now, it’s time to start wondering when the Fed will (cue the “Friends” couch GIFs) pivot and begin cutting rates. (Next summer perhaps?)
Part of the enthusiasm might be the market’s typical year-end buying binge. Stocks often perform well in November and December and so far this month, the bulls are clearly out in full force. The Dow is up 6%, the S&P 500 has gained 8% and the Nasdaq has shot up 10%. You might even say it’s starting to look frothy again. The CNN Business Fear & Greed Index, which I helped create, is now hovering near Greed territory for the first time since early September.
But the market also is clearly betting that the Fed is going to stick an elusive soft landing for the economy, avoiding a recession despite the aggressive rate hikes since March 2022 that have pushed rates from zero to a range of 5.25% to 5.5%. It still remains to be seen if this is wishful thinking. After all, the housing market is showing signs of softness. Weekly jobless claims, while still historically low, have recently started to inch higher.
So can the market keep rallying into 2024? As is always the case when it comes to stocks, it will come down to earnings. The good news, for now at least, is that analysts are forecasting solid growth; profits for the S&P 500 are expected to rise nearly 12% next year from 2023 levels, according to FactSet Research. If Corporate America can live up to these lofty targets, then stocks may keep climbing….especially if Jerome Powell and the rest of the Fed give the market the rate cuts that it wants by mid-2024.
Of course, there’s that whole presidential election thing next year that has the potential to rattle investors. But that’s a blog post for another day.