November Newsletter
Hello everyone,
Wow, I can't believe it! 67 editions already! One thing is for sure, I'm getting pretty darn good at counting in Roman numerals. LOL. Anyhow, what can I say, another Trump Presidency… and boy, do financial markets love it! The S&P 500 is up a crazy 5.10% and the TSX is up 5.70%. The big question is, can the markets keep it up?
There are varying outlooks and perspectives on the financial market trends moving into 2025. J.P. Morgan's outlook for 2025 highlights a foundation of strength in the market derived from robust returns in 2024, where economic growth and inflation achieved a better balance (J.P.Morgan – Key Takeaways). Factors such as central bank rate cuts, increased spending on artificial intelligence adoption, power, and infrastructure are expected to contribute to building on this foundation of strength heading into 2025. Check!
However, Forbes discusses potential limitations for stock market growth in 2025, citing ongoing economic sluggishness in China as a significant factor that may impact market performance (Forbes – Stock Market Predictions). Uncheck!
In considering these diverse viewpoints from these two leading financial institutions, the momentum of the financial markets into 2025 is clearly subject to multiple variables and economic conditions that could shape market outcomes and investor returns in the upcoming year.
In the short-term, December is a significant month for financial markets, characterized by a confluence of factors that can influence market dynamics, investor sentiment, and portfolio positioning. Specifically, in the year when Republicans are elected to the White House, financial markets often witness distinct patterns and reactions driven by policy expectations.
Historically, in the aftermath of a Republican victory in the presidential election, financial markets have displayed a degree of optimism and buoyancy leading into December. The election of a Republican president often brings expectations of pro-business policies, tax reforms, and regulatory rollbacks, which can elicit positive market sentiment and drive asset prices higher. Investors anticipate a favorable environment for businesses, potential economic stimulus measures, and a re-evaluation of sectoral prospects under a new administration, influencing investment decisions and market outlook as December unfolds.
Normally, the energy and financial sectors often experience heightened activity and reshuffling of portfolio holdings in December following a Republican presidential election. With expectations of deregulation, energy companies and financial institutions may benefit from policy shifts and industry-friendly measures.
Moreover, the technology and healthcare sectors also attract attention in December following a Republican presidential election, as market participants gauge the implications of policy proposals, regulatory changes, and industry-specific dynamics. Amid expectations of potential shifts in healthcare regulations and technology policies, investors scrutinize these sectors for opportunities and risks, leading to adjustments in sectoral valuations, stock performances, and investment allocation strategies in the final month of the year.
Furthermore, the global implications of a Republican presidential election can impact international markets and emerging market economies, contributing to cross-border asset flows, currency movements, and geopolitical considerations. Investors navigate the ripple effects of a Republican victory on global trade dynamics, geopolitical stability, and international investment opportunities. We are already starting to witness changes with Trump's proposed trade policies with Canada, Mexico, and China. Nations are already reacting to the news and taking measures to please the red, white, and blue giant!
Aside from "Trump-nomics", December often offers another carrot. There is this strange phenomenon in December called the "Santa Claus effect". The "Santa Claus Effect" is where there is a sustained increase in stock prices around the Christmas holiday, typically occurring in the last few trading days of December and the first few trading days of January of the following year (Investopedia – Santa Claus Rally). This rally is commonly observed in the S&P 500 index and is often seen as a positive sentiment boost for investors as it coincides with the holiday season.
The importance of the Santa Claus Rally lies in its potential impact on investor sentiment and market psychology. The rally can reinforce positive market sentiment, leading to increased investor confidence and a sense of optimism moving into the new year. The phenomenon is closely watched by market participants as it can provide insights into investor behavior and expectations for the upcoming year (Bankrate – Santa Clause Rally in Stocks). In summary, the Santa Claus Effect in financial markets symbolizes the potential year-end rally and sets the tone for market performance in the new year. So, here's to hoping! Fingers crossed…
Circling back or to summarize the above, industry professionals have varying predictions for the outlook in 2025. While Forbes predicts a range from a 5% decline to a growth of 20%, many others foresee a 10% increase as the most likely scenario (Forbes – Stock Market Predictions for 2025: What is Coming Next year). J.P. Morgan, in a report cited by Business Insider, is bullish about the stock market outlook for 2025 and anticipates the S&P 500 to experience an 8% increase (Business Insider – Stock Market 2025 Outlook: JP Morgan turns Bullish, See S&P 500 up 8%). To give some validation to this, other analysts also estimate the S&P 500 to reach 5,975 by the quarter ending September 30, 2025, reflecting a 4.1% growth from the end of the recent survey period on September 27, 2024, as indicated by Yahoo Finance (Yahoo Finance – Stock market outlook for the next 12 months). But hold on, we're already there! The S&P 500 is trading around 6035.84 at the time of this writing. Given the said above, I guess we can expect marginal growth or at least another 4% by September 2025… LOL
There you have it. November turned out to be a decent month and from what I can gather, December and 2025 is looking, well, not too shabby. Before I end this commentary, I'd like to leave you with this: As the holiday season approaches, we (Louise, Jess, Dana and I) would like to take a moment to express our gratitude and extend warm Christmas greetings to each and every one of you.
During this festive time of year, we reflect on the relationships we have built with you and the trust you have placed in us. Your continued support has been instrumental in our success, and we are truly grateful for the opportunity to serve you. We look forward to continuing our journey together in the coming year.
Wishing you and your families a Merry Christmas filled with laughter, love, and unforgettable memories.
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