The New Year is off to a rousing start for the U.S. stock market. With the recent stock bear market now definitively behind us and a new all-time high on the S&P 500 now in the books, it is reasonable to consider what are the most likely pain points that could dash the optimism for the U.S. stock market as we continue our way through 2024.

Investors are all a flutter over the idea that the U.S. Federal Reserve is set to aggressively cut interest rates in 2024. It was a primary narrative behind why both the stock and bond market rallied so strongly in November and December of last year. And the debate about how many rate cuts and when ranks at the top of the list of discussion topics in the financial news media today.

It has been a sputtering start for capital markets thus far in 2024. The performance of the headline benchmark S&P 500 has been bumpy at best in moving between marginal gains and losses so far in January.

A fresh new calendar year is underway for capital markets, so much focus is on what we can reasonably expect in the year ahead. But given that capital market movements flow across the beginnings and ends of our calendar pages, it is worthwhile to consider as investors get back up to speed from the holiday season what segments of the markets have been winning thus far, and what areas of the market may have been left behind and offering potential opportunity depending on how events unfold in the weeks ahead.

The age-old stock market adage has rang so true over the past year.  The notion of “sell in May and go away” is based on the historical trend of relative underperformance by stocks during the period from May 1 to October 31.  Of course, the flip side of this adage is the historical trend of relative stock outperformance during the period from November 1 to April 30.

It has been a November to remember. Following a three-month slide from August to October that saw U.S. stocks decline by more than -10% and the 10-Year U.S. Treasury yield jump by more than a percentage point (ouch and ouch), capital markets roared back to life this month.

Capital markets have had a remarkable run in recent weeks. After bottoming at the end of October, the S&P 500 Index has soared roughly +10%. The 10-Year U.S. Treasury yield has also plunged by more than a half percentage point since recently peaking at 5.00%, driving a comparable nearly +10% bounce in long-term U.S. Treasuries. Given these head turning gains for both stocks and bonds over such a short-term period of time, it is reasonable to consider what we should reasonably expect from here between now and when many across America are carving turkey for their Thanksgiving Day feasts.

Just over a week ago, both stock and bond markets were long overdue for a bounce. And bounce they have. Just like a slingshot, the further and deeper capital markets pulled back through late October, the greater the energy released once the upside rally finally arrived. In the wake of this recent capital market burst, it is worthwhile to evaluate both where we stand today and what we can reasonably expect in the weeks ahead through the end of the year.

It’s been a haunted ride for capital markets over the last two years. And just when it looked like the horrors were finally coming to an end this past summer, the last few months have seen the stock and bond market demons rise again. While a new dawn may still lie ahead for capital markets in the coming months, here … Read More