As expected, the stock market rallied ahead of the Thanksgiving holiday last week. In fact, the S&P 500 and Dow both climbed to new highs. Overall, the S&P 500 rose 0.9% in the past week. But according to the folks at Bespoke, this is just the beginning. In today’s blog, we’ll take a closer look at what this all means for you…
Over the past 10 years, the S&P 500 has historically rallied about 1.36% from November 20 to December 4. And 10 of the S&P 500’s sectors posted positive gains during this time. The one exception was energy, which fell about 0.13%. So while the stock market took a breather yesterday, I expect the S&P 500 will bounce back in the coming days—and then rally through yearend.
That said, the one headline worth noting last week was the release of the November Federal Open Market Committee (FOMC) meeting minutes. The FOMC used more ambiguous language, and stated that it still had doubts that low inflation would persist. Of course, these inflation comments raised some doubt that the Fed would raise key interest rates at its December FOMC meeting.
Then again, the FOMC minutes also revealed that "many" Fed officials viewed an increase in key short-term interest rates as "warranted." This is classic double speak from the Fed. If the FOMC does not raise key interest rates in December, it’s likely due to the fact that the Fed is currently led by lame ducks. The flattening yield curve is likely causing many members to pause, as well.
Overall, though, I expect the Fed will increase key interest rates at their December FOMC meeting. The Fed likes to raise rates in December when Main Street and Wall Street are distracted with the holidays. But the December rate hike will likely be their last key interest rate increase. With the 10-year Treasury yield curve at its flattest point in a decade, the Fed will not want to "invert" the yield curve by pushing additional rate hikes.
So if the Fed confirms that December is indeed their last key interest rate hike, I expect a big stock market rally—and I expect this rally to continue through yearend and into the New Year. Of course, as any stock market climbs higher, it grows narrower. Simply put: Investors will be focusing on the creme de la creme, and my Ultimate Growth stocks stand to benefit directly from this trend.
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However, if you aren’t ready to join Ultimate Growth yet, I urge you to stay tuned into this blog. I’ll continue revealing actionable strategies and insights right here every day the market is open.