Here’s the content:
While the stock market’s recent trends have been indecisive, some argue that a prolonged post-Thanksgiving digestion period is likely responsible. Despite the S&P 500’s trend remaining strong, the broader market has softened and narrowed since December, with the equal-weight S&P 500 off 3% for the month. The tech-heavy Nasdaq 100 has countered this pressure, however, with a 4% advance in December.
Some have noted two distinct tracks in the market: an orderly core featuring solid gains, alongside a rushing current of speculative investments in areas like Trump-era trades, tech, cryptocurrency, and heavily shorted stocks. A recent downsizing of momentum stocks failed to generate significant market volatility, leading some to predict that this is a general trend rather than a source of concern.
The possibility of an economic stumble being more likely than previously expected has not been ruled out, despite the absence of recession predictions. However, even mid-to-late-cycle expansions do not rely on deep reservoirs of fear and foreboding to thrive.
The uncertain climate surrounding economic policy has fueled dispersion, with investors trying to identify winners and losers from policy proposals. Valuations have become a point of concern, with many handicappers forecasting higher indices in 2025 despite a somewhat elevated starting point.
History suggests that it’s unlikely that the sustainability of market gains will depend on whether the past performance continues, with a large number of investors already looking forward to another 25% gain in the index. However, the reality may be that a single large gain in 2025 could be as likely a result of its volatility in recent years.