Inflation is cooling, yet the cost of living remains high. Annual inflation is down to about 2% yet cost of living is up about 22% since January 2020 - I won't get into some of the individual categories and their price rise. What we've also seen over the last two years is the strengthening of the major corporate and their share price.
We have just closed another month in 2024 and the S&P 500 up +5.73% on the month, placing it up now 26.47% YTD (28.07% including dividends). November marks the 13th month in a row of the S&P 500 closing above its 200-day moving average which is an indicator of an upward trends - so yeah, market is strong.
Here are a few other interesting points to note:
US stocks now account for about 75% of Developed Markets.
The S&P 500 closed up +5.73% in November (+26.47% YTD and +28.07% including dividends).
About 1/3 of the stocks in the S&P 500 get replaced each decade.
With only weeks remaining in 2024, stocks are on track for a strong finish. In fact, going back to 1990, only three other years had a better start: 1995, 1997, and 2013.
That's not all for 2024, the market has also hit 52 all-time closing highs (ATHs), with only six other years having seen more than 50 ATHs since 1929.
This has turned investors even more bullish than they have ever been since 1987. In fact, a record number of US households (51.4%) say that stock prices will move higher in the next 12 months. From a contrarian perspective, this suggests that a pullback is likely.
However, this in on of itself is not a market timing tool as back-to-back strong years is perfectly normal. In fact, it bodes well for year three of a bull market. Since 1950, there have been eight other times stocks gained 20% two years in a row and the next year was higher six times (75% of the time) with a solid 12.3% on average. See table below.
A more immediate risk to the stock market rally than tariffs is that investors are getting too bullish.
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