3 reasons we see investors "buy the dip" and drive a Dec rally to 6,300. Also, Trump reiterates Bitcoin reserve plans, adding upside to our $250,000 base case for 2025. Array ( [cookie] => e7599f-ecb64d-2517f7-fca116-691ae8 [current_usage] => 1 [max_usage] => 2 [current_usage_crypto] => 0 [max_usage_crypto] => 2 [lock] => [message] => [error] => [active_member] => 0 [subscriber] => 0 [role] => [visitor_id] => 0 [user_id] => 0 [reason] => Usage under limits [method] => ) 1 and can accesss 1

VIDEO: The risk/reward is challenged near term due to the key incoming macro data, but we still see a YE rally

Please click below to view our Macro Minute (duration: 4:59).

We are in the final weeks of 2024 with 11 trading days left. Given 2024 has been such a strong year (avoiding many opportunities for weakness) and given the positive seasonals, we continue to see the S&P 500 moving higher into year-end reaching 6,300.

• As we noted a few weeks ago, we saw markets entering a “zone of hesitation” book ended from Nov jobs (12/6) to Dec FOMC rate decision (12/18) before stocks finally make a push higher into year-end. The Dec FOMC rate decision is this week.

• The following are the key macro data points for the coming week:
  – 12/16 Mon 8:30 AM ET: Dec Empire Manufacturing Survey    10.0e
  – 12/16 Mon 9:45 AM ET: Dec P S&P Global Manufacturing PMI    49.5e
  – 12/16 Mon 9:45 AM ET: Dec P S&P Global Services PMI    55.7e
  – 12/17 Tue 8:30 AM ET: Nov Retail Sales Advanced MoM    0.5%e
  – 12/17 Tue 9:00 AM ET: Dec M Manheim Used Vehicle Index
  – 12/17 Tue 10:00 AM ET: Dec NAHB Housing Market Index    47e
  – 12/18 Wed 2:00 PM ET: Dec FOMC Decision     -25bpe
  – 12/19 Thu 8:30 AM ET: 3Q T 2024 GDP QoQ    2.8%e
  – 12/19 Thu 8:30 AM ET: Dec Philly Fed Business Outlook    3.0e
  – 12/19 Thu 10:00 AM ET: Nov Existing Home Sales    4.08me
  – 12/19 Thu 4:00 PM ET: Oct Net TIC Flows
  – 12/20 Fri 8:30 AM ET: Nov Core PCE MoM    0.18%e
  – 12/20 Fri 10:00 AM ET: Dec F U. Mich. 1yr Inf Exp
• Of these, the two most important are:
  – Wed 2pm ET: FOMC Dec rate decision, 25bp cut expected
  – Fri 8:30am ET: Nov Core PCE MoM
• For the remainder of the month, these are really the 2 key macro data points. And after that, we believe the seasonal dynamics (Dec finishes strong) and the relative positioning dynamics are supporting stocks into year-end.

• To recap, the multiple factors supporting a rally into year-end. These factors are:
  – Seasonally Dec strong – 83% probability
  – Interest rates declined pre-election levels
  – Sentiment cautious = contrarian positive
  – Fed “put” + Trump “put” = “buy any dip”
  – Positioning = “buy any dip”
• There are 3 positioning highlights we want to make:
  – first, 69% of institutional managers (mutual funds + active) trailing benchmarks
  – second, median hedge fund gain in 2024 is +8.75%, solid and still “buying the dip”
  – third, Fidelity notes that at least $1 trillion of retail cash is “excess on sidelines”
• LSEG data shows that of 8,911 funds that analyzed, 69% are trailing their respective benchmarks. These managers are less likely to be “selling” stocks into year-end but in our view, would use the remaining trading days to buy and dip.
• Similarly, we view the fact that hedge funds are +8.75% YTD (per Aurum) as funds having a solid year. And given the solid visibility into 2025, we expect these funds to buy the dip in December.
• Jurian Timmer, Strategist at Fidelity Investments, notes that if looking at credit spreads (currently tight, or good), money market cash should be closer to 8% of assets not 11%. Thus, he believes $1 trillion of the $7 trillion of retail cash on the sidelines is “excess” — that is a ton of firepower. Thus, more cash ready to “buy the dip”
• As for the seasonality argument. Since 1950, here are probabilities of an “up” December:
  – since 1950 (n=74)
  – when S&P 500 up >10% first half (n=23)
  – December higher 83% of time, median +2.9%
  – if ALSO election year, 100% of time, median +3.4%
  – implies S&P 500 6,250, close enough to 6,300
• We also want to reiterate the importance of Bitcoin to a portfolio. There were some notable developments in the past few days:
  – first, Blackrock in a white paper, suggests a 2% allocation is reasonable
  – this is consistent with our long-standing recommendation of at least 2% into Bitcoin
  – second, President-elect Donald Trump told CNBC on Friday plans
  – to make a “Bitcoin reserve” similar to oil (see below)
• Our Head of Digital Assets Strategy, Sean Farrell, believes that a US Bitcoin Strategic Reserve adds upside to Bitcoin as much as $500,000 in 2025. This is above our current base case of $250,000.

Bottom line: Stay on target into year-end

We see stocks rallying into year-end, with the possibility of a “zone of hesitation” near-term. But we would urge investors to buy this dip. That said, we see more upside for other groups. This holds whether looking at 2016, or whether thinking of a dovish Fed. The drivers are:

• de-regulation
• drop in cost of capital for businesses
• general “animal spirits” given Republican White House and Senate

This favors the following groups:

• Small-caps: IWM -3.91%  IJR -3.98%
• Cyclicals: XLF -3.93%  KRE -5.30%  XLI -3.32%
• Bitcoin: BTC MSTR -5.88%  SMLR 1.40%

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Key incoming data December:

• 12/2 9:45 AM ET: Nov F S&P Global Manufacturing PMI Tame
• 12/2 10:00 AM ET: Nov ISM Manufacturing PMI Tame
• 12/3 10:00 AM ET: Oct JOLTS Job Openings Tame
• 12/4 9:45 AM ET: Nov F S&P Global Services PMI Tame
• 12/4 10:00 AM ET: Nov ISM Services PMI Tame
• 12/4 10:00 AM ET: Oct F Durable Goods Orders Tame
• 12/4 2:00 PM ET:  Fed Releases Beige Book Dovish
• 12/5 8:30 AM ET: Oct Trade Balance Tame
• 12/6 8:30 AM ET: Nov Non-Farm Payrolls Tame
• 12/6 9:00 AM ET: Nov F Manheim Used vehicle index Mixed
• 12/6 10:00 AM ET: Dec P U. Mich. Sentiment and Inflation Expectation Tame
• 12/9 11:00 AM ET: Nov NY Fed 1yr Inf Exp Tame
• 12/10 6:00 AM ET: Nov Small Business Optimism Survey Tame
• 12/10 8:30 AM ET: 3Q F Non-Farm Productivity Tame
• 12/10 8:30 AM ET: 3Q F Unit Labor Costs Tame
• 12/11 8:30 AM ET: Nov CPI Tame
• 12/12 8:30 AM ET: Nov PPI Mixed
• 12/16 8:30 AM ET: Dec Empire Manufacturing Survey
• 12/17 8:30 AM ET: Nov Retail Sales Data
• 12/17 9:00 AM ET: Dec P Manheim Used vehicle index
• 12/17 10:00 AM ET: Dec NAHB Housing Market Index
• 12/18 2:00 PM ET: Dec FOMC Decision
• 12/19 8:30 AM ET: 3Q T 2024 GDP
• 12/19 8:30 AM ET: Dec Philly Fed Business Outlook
• 12/19 10:00 AM ET: Nov Existing Home Sales
• 12/19 4:00 PM ET: Oct Net TIC Flows
• 12/20 8:30 AM ET: Nov PCE Deflator
• 12/20 10:00 AM ET: Dec F U. Mich. Sentiment and Inflation Expectation
• 12/23 8:30 AM ET: Nov Chicago Fed Nat Activity Index
• 12/23 10:00 AM ET: Dec Conference Board Consumer Confidence
• 12/24 10:00 AM ET: Nov New Home Sales
• 12/24 10:00 AM ET: Nov P Durable Goods Orders
• 12/30 10:30 AM ET: Dec Dallas Fed Manuf. Activity Survey
• 12/31 9:00 AM ET: Oct S&P CoreLogic CS home price

Economic Data Performance Tracker 2024:

Economic Data Performance Tracker 2023: