Market watchers have been at pains to point out that much of the S&P 500’s 24% gain this year has been due to the stellar performance of Big Tech – and the AI glitterati. But the equal-weighted S&P 500, which strips out the megacaps, is heading for a near 11% gain this year, most of which has come over November and December.
The S&P is heading for a 0.5% gain this week. This might look a bit flimsy as “Santa rallies” go, but it will mark the eighth straight week of gains for the index – the longest such stretch since late 2017. And there has never been this kind of momentum in the run-up to Santa’s stock market boost before.
The longest string of weekly gains ahead of the Santa rally – gains in the week leading into Dec. 25 – was a five-week stretch in 2019.
Greasing the wheels of this rally is the biggest two-month drop in 10-year U.S. Treasury yields since 2008, which has created a theoretical sweet spot for stocks.
Inflation numbers later on Friday could give this year’s Santa rally some extra sparkle, but they are unlikely to materially change the view that the Federal Reserve could cut interest rates down to 3.50-3.75% by the end of next year, from 5.25-5.50% right now.
