Goldman Sachs The Markets Why a “Santa Rally” may be ahead
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Nov 15, 2024 As U.S. stocks hit record highs, optimism post-election fuels gains. The potential for a Santa rally is on the table, driven by solid earnings and economic data. Client interest pivots toward financial and energy sectors, while rising interest rates raise questions about stability. Key economic indicators like PCE inflation and non-farm payrolls could influence Federal Reserve strategies. Amidst the serious discussions, there's a fun nod to sports, particularly the Knicks, adding a personal touch to market analysis.
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S&P Rally Drivers
- The November S&P rally is primarily driven by post-election optimism, especially regarding deregulation, M&A, and IPOs.
- Other factors contributing to the rally's sustainability include strong earnings, corporate buybacks, and renewed retail investor engagement.
Santa Rally and Market Breadth
- A Santa rally is expected, with a potential S&P 500 target of 6300 by year-end.
- Market breadth is also projected to improve, with increased engagement in various market segments beyond the MAG7.
Valuations and Market Outlook
- Valuations are a concern, having traded near a 22 times P/E multiple.
- However, valuations alone won't break the market; a significant pullback in earnings growth or economic data is needed.