December is usually a great month for the stock market – it's never been the worst month for stock performance in a year until 2018, when the S & P 500 fell more than 9% in December.
But even in this period, the stock market benefited from the so-called Santa Claus Rally, which usually led to growth at the end of December: From December 26, the S & P 500 rose in just four trading sessions by an impressive 6.6% to the end of the year.
This year, Tom Lee, Research Director at Fundstrat Global Advisors, predicts that US equities will benefit from another Santa Claus rally – this time without all the ugliness ahead of Christmas. "We are in the last eight weeks of 201
Since 1998, when the S & P 500 rose more than 9.5% from the beginning of the year to the first week of November, the average has continued to increase. The increase is 4%, while 10 out of 10 cases show a positive growth he stressed.
In an interview with MarketWatch, Lee said he was confident that, despite flat earnings growth for much of the year 2019, stocks would continue to rise as the market did not catch up on fast 2018 earnings growth. "In the last two years, the result has grown faster than the price. Since 2017, revenue has grown by 11% a year and the market is only growing at 7% a year, "he said. "What's happening now is catching up on stock prices."
He said that the biggest risk to this outlook is an "external shock" such as an escalation of the trade war or a hard exit, but he does not believe that we need a solution to the trade dispute between the US and China Market can continue to grow.
"I do not think the trade war needs to be resolved to support the rally," he said. "The reason why we do not think this is necessary is that, given this trade uncertainty, companies have shown that they have been able to maintain margins and exceed expectations." It is a worsening of the situation that would hurt stocks but does not maintain the status quo. "
Lee, who raised his year-end target for the S & P 500 to 3,185, argued that Wall Street bears spent much of its money. A year in which fears that weak growth abroad infects the US would fail to recognize that the US is decoupling from the rest of the world.
The US outlook does not depend on trade, but positive population growth is unique in the US among rich countries, he said. "The main driver of the economy is population growth and especially growth in the important age group of 30- to 50-year-olds."