U.S. investment bank Goldman Sachs (GS) says investors should expect a year-end Santa Claus rally in the final few trading sessions of 2024.
A strong U.S. economy, the prospect of more interest rate cuts, and record inflows into U.S. equities have primed the stock market for a Santa Claus rally, says Goldman Sachs.
Scott Rubner, Goldman’s lead technical strategist, says in a note to clients that in the last nine weeks, U.S. equity markets have seen a record $186 billion U.S. worth of inflows.
The record inflows have helped drive up share prices of the so called “Magnificent Seven” technology stocks that include Apple (AAPL) and Amazon (AMZN).
The inflows have also boosted the value of passively managed assets such as exchange-traded funds (ETFs) to $11.77 trillion U.S.
Now, with markets pricing in a 97% chance that the U.S. Federal Reserve will cut interest rates by 25-basis points at its final policy meeting of the year on Dec. 18, markets are primed for a Santa Claus rally, says Rubner.
A Santa Claus rally refers to the tradition of U.S. stocks rallying in late December to close out the year. Rubner adds in his report that the year-end rally is likely to continue into 2025.
“My SPX 5K hat has been retired, my SPX 6K hat is tossed, and my SPX 7K has been ordered,” the Goldman Sachs technical strategist writes, referring to the fact that the benchmark S&P 500 index is now trading above the 6,000 level.
The Goldman Sachs strategist also notes that the current stock market rally is likely to get a boost from $1 trillion U.S. worth of share buybacks that U.S. corporations have authorized for the coming year.
The S&P 500 index is up 28% this year and currently at 6,051.25. Goldman Sachs own stock has gained 52% this year to trade at $591.61 U.S. per share.
