Our December 2024 Equity Market Forecast

With the election in the rearview, markets and investors are evaluating what’s on the horizon, making equity market forecasts for the rest of this year and into the next. 

In this article, members of our Investment Policy Committee share their perspectives on the future as well as insights into how we are positioning our portfolios to minimize risks and maximize returns.  

Market seasonality involves referencing historical data to understand how the markets tend to react throughout the year. This seasonality data tells us that December is usually a great month and includes what’s known as the “Santa Claus rally.”  

But how does the recent election affect this positive outlook for the end of the year?  

Perhaps surprisingly, it elevates it.  

During election years, we tend to see an even better outlook for December, allowing us to position into equities and maintain healthy-looking portfolios as we close out the year.  

Despite market seasonality forecasting a positive outlook for December, we are also considering the effects of the Federal Reserve’s rate-cut decisions.  

There have been two rate cuts this year — a 0.5% cut in October and a 0.25% cut in November — and there’s an approximately 50/50 expectation of a third rate cut in December. What happens if this cut doesn’t come to be?  

There is a lot at play with rate-cut decisions, but lately, we’ve seen strong economic indicators, and you can be sure the Fed sees them, too.  

As such, inflation may stay elevated, and it’s possible that the Fed will not cut interest rates to the extent that the market is pricing in. This would create higher yields, which are negative for bond prices.  

We monitor the Fed’s actions, interest rates, and the markets, so while you don’t need to worry about how your portfolio will react to a rate cut (or lack thereof), stay aware of factors that may influence how the rest of the year plays out.  

Another thing investors and economists are following postelection is the talk of reinstated tariffs, which is fueling dialogue about a deeper potential recession over the next 12 months.  

In this situation, we have a rare blueprint to reference, as the newly elected administration installed tariffs while previously in office. Conventional wisdom suggests that the inception of tariffs would have caused U.S. multinationals to perform poorly while U.S. small-cap and mid-cap companies (which derive most of their revenue domestically) did well. That reality didn’t transpire.  

Therefore, while we can consider this historical blueprint, we should hold it lightly, understanding that things don’t always turn out as expected. Instead, we’ll continue to gauge the overall economic backdrop over the next four years and remember to stay invested amidst all kinds of rhetoric.  

What does all of this mean for you and your portfolio?  

In light of key data (earnings, technicals, and fund flows), our aggregate portfolios favor domestic equities.  

In addition, the recent earnings season was better than expected for large-cap companies versus mid-cap and small-cap companies. As such, we are positively overweight in large-cap stocks.   

Finally, because of uncertainty regarding rates and recessions, we are using structured assets to hedge our equity market participation. We believe this is a timely, tactical decision, and we plan to keep this hedge in place until May, when we will reassess its necessity after the release of Q1 2025 GDP data.   

We are also paying attention to the dollar and its impressive rise, and we’re taking a cautious view of international equity markets while implementing a currency hedge on that front.

Credent clients can continue to follow their plans and trust their portfolios, knowing we adjust as needed to account for current events and future possibilities.  

For those who do not have a trusted plan or portfolio, consider working with a team of advisors and investment experts who anticipate and respond to the economy and markets to keep clients aligned with their goals and needs.

To learn more about our current equity market forecast and portfolio positioning, reach out to a team member using the form below.