A Big Year for the Indexes Ends on a Sour Note
While big investors decided it was better to front-run a potential pullback in 2025, here's the good news and the primary question for market followers in the new year.
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The S&P 500 gained about 24% in 2024, but December was an abysmal month, as the much-anticipated Santa Claus rally never materialized. There were a few small pockets of small-cap speculation, but both the Russell 2000 IWM and the Magnificent Seven names struggled at the end of the year.
Some experts expected that the big-cap technology stocks that drove the market higher in 2024 would be marked up and avoid being sold because of tax implications, but that was not the case. Many big investors decided it was better to front-run a potential pullback in the new year.
The action in smaller and secondary stocks was very poor throughout December. The group spiked higher on the Trump election victory but topped out in late November and trended steadily lower for weeks. There were a couple of hopeful spikes higher, but they fizzled out quickly.
The good news is that many of these smaller stocks are oversold, and with tax-loss selling pressure eliminated, they will be in good shape for some bounces into fourth-quarter earnings season in a month or so.
As we start the new year, the primary question will be whether rotation action will take hold or whether the Magnificent Seven MAGS will continue to dominate. While there were a few brief periods of rotation in 2024, investors always returned to the mega-cap technology names. Analysts still favor these stocks, but they are becoming very expensive compared to other areas of the market.
One thing we can be certain of in 2025 is that there will be plenty of twists and turns.
My best wishes for success in the New Year. I hope you will join me in making it the best year ever.
Happy New Year.
At the time of publication, Rev Shark had no positions in any securities mentioned.
