Stock futures inch down, but it may be hard to stop the optimism (DJI)

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The Dow Jones (DJI) did it last week. So did the Nasdaq 100 (NDX). Now it looks like it’s the S&P 500’s (SP500) turn to record a new all-time closing high. Following another session in the green on Tuesday, the benchmark index is only 30 points away from the upcoming milestone, meaning another move of 0.6% can bring it the vaulted trophy. S&P 500 futures (SPX) are inching down in the premarket, but one never knows what could happen during the regular session. The benchmark could also have to wait a little longer, or for a Santa rally to charge things up next week.

Snapshot: There’s been a shift in expectations for monetary policy since late October, sending equities on a broad seven-week rally. The most recent boost came during last week’s FOMC meeting, where Fed Chair Jay Powell formally lowered inflation forecasts for 2024 and telegraphed three rate cuts in the new year. “The question of when will it become appropriate to begin dialing back the amount of policy restraint in place… is clearly a discussion topic out in the world and also of discussion for us,” he declared. “I would say there’s a general expectation that this will be a topic for us looking ahead.”

Notably, the biggest contributors to the S&P 500’s (SP500) banner year have been the usual suspects, currently dubbed the Magnificent Seven. The group that includes Alphabet (GOOGL), Amazon (AMZN), Apple (AAPL), Meta (META), Microsoft (MSFT) Nvidia (NVDA) and Tesla (TSLA) is up a combined 75% in 2023, while the remaining 493 companies in the S&P 500 are about 12% higher, resulting in a 25% YTD gain for the index as a whole. The bull market has given big returns to many investors, and has just seen Wall Street’s fear gauge – known as the VIX – slide to its lowest level since the start of the COVID pandemic.

What’s in store for 2024? “The pivot from ‘higher for longer’ to rate cuts is bullish for the stock market as it could cancel the recession,” notes SA analyst Damir Tokic, while Investing Group Leader Victor Dergunov says that stocks could even go much higher next year. Zoltan Ban takes a contrarian view, predicting that the S&P 500 will decline to 3,500 due to various factors such as higher oil prices and a slowing economy. “There is little doubt that FOMO has crept back into the market the same way we’ve seen in the past,” Fear & Greed Trader cautions in Wall Street: Investing In 2 Different Worlds.

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