The stock market has been on quite the rollercoaster ride throughout 2024, showcasing significant fluctuations between historic highs and unsettling downturns. The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average all reached all-time highs as recently as early December, buoyed by positive statements from Federal Reserve Chair Jerome Powell, who remarked on the U.S. economy being "remarkably good shape."
Yet, since those peaks, the situation has shifted dramatically, with all major indices slipping back. This volatility has left investors feeling uneasy, stirring concerns about what the coming months might bring. Data from history suggest potential challenges may lie just around the corner.
One closely watched event during this season is the infamous Santa Claus Rally, which historically occurs during the last five trading days of December and the first two of January. Coined by Yale Hirsch way back in 1972, this phenomenon typically sees the S&P 500 gain approximately 1.4% on average, occurring nearly 80% of the time. But this year, market watchers have been met with disappointment as the rally failed to materialize. Notably, when the Santa Claus Rally is absent, history indicates greater hardships loom, often leading to declines during January and subdued returns throughout the rest of the year.
According to Hirsch's original note, "If Santa should fail to call, bears may come to Broad & Wall." A disappearing rally, particularly following its absence for two consecutive years, is concerning since it marks just the third occurrence of this phenomenon since 1950, hinting at impending corrections on the horizon.
The bleak outlook stretches beyond U.S. shores. The London Stock Exchange (LSE) faced one of its quietest years on record, undergoing the largest net outflow of companies since the 2008 financial crisis. Notable companies like Just Eat and Flutter Entertainment recently announced plans to ditch their main UK listings due to declining liquidity and lower valuations, preferring the U.S. markets for the access to capital they offer.
Data from auditing firm EY indicates the LSE saw 88 companies delist or shift their primary listings, echoing the 2009 exodus. This outflow was compounded by the lowest count of initial public offerings (IPOs) since they began tracking this data, with only 18 IPOs last year. Comparatively, five times more firms left the market altogether, raising serious questions about the sustainability of the LSE's appeal.
Scott McCubbin, EY's IPO lead for the UK and Ireland, stated, "Ongoing geopolitical instability, slow economic growth, and diminished appetite for domestic equities among pension funds have impacted valuations and liquidity." He noted as the LSE heads toward 2025, there are still reasons for cautious optimism, providing hope amid the unease.
Companies such as Flutter and Just Eat have recognized the benefits of relocating their listings, with Flutter Entertainment declaring it would rather be among the "world’s deepest and most liquid capital markets" now available in New York. The recent decision by Just Eat to fully abandon its London listing reflected growing frustration over the surrounding regulations, complexity, and administrative burdens associated with maintaining shares within the UK.
Even with these concerns, 2024 has shown strong stock market performance overall. Major tech companies, sometimes referred to as the "Magnificent Seven," including Apple, Alphabet, and Amazon, significantly outperformed the S&P 500, which had seen gains of 23% throughout the year. These tech giants recorded remarkable increases, many exceeding 30%, significantly boosting their market power and presence—together, they accounted for over half the overall gains of the S&P 500.
Illustrative of their giant influence, Apple, with its enormous market cap of $3.8 trillion, made up 7.65% of the S&P 500's total. This historical figure shows more impact than any single stock has had since the dawn of the index itself. Companies linking arms with sports media—having established partnerships to secure streaming rights—drive broad market trends, redefining how sports coverage intersects with consumer technology.
Apple’s deal with MLS, worth $250 million annually, and other partnerships, including YouTube's exclusive NFL broadcasting rights and Amazon's acquisition of NBA rights, showcase how tech giants are not merely peripheral participants but central to future market strategies. The competitive field now includes tech firms as formidable players shaping viewer habits.
Interestingly, both Christmas NFL games streamed via Netflix became some of the most-watched broadcasts of the year, evidencing the massive shifts occurring within media consumption frameworks.
Looking forward, the forecast for the stock market reveals cautious optimism. Experts remind us of the importance of market fundamentals, emphasizing the need for attentive management amid uncertainties. Investors and companies alike appear anchored, awaiting the signals of stability and growth as they march toward 2025. With historical precedents informing expectations, perhaps we can prepare for whatever twists and turns the markets may take next.