Markets ended the holiday-shortened week higher, with the S&P 500 setting two new record highs along the way. Performance was aided by strong third quarter GDP data which easily exceeded the consensus forecast. The data helped assuage ongoing concern about the overall strength of the economy and, perhaps more importantly, the health of the consumer. The numbers suggested that both remain in good shape despite ongoing concerns about tariffs and slowing labor market conditions. Though stronger economic growth could push out the timing of the Fed’s next rate cut, over longer time periods, market performance is driven by earnings growth, which is largely determined by economic growth.
Bonds eked out a small gain for the week as the Bloomberg US Aggregate Bond index, the broadest measure of the US bond market, remains on track for it best year since 2020.
Precious metals—gold, silver, platinum—continued their recent strong performance with all three setting new record highs. Collectively, precious metal prices have been supported over the course of the year by US dollar weakness, Federal Reserve rate cuts, concerns about higher inflation, and periodic spikes in geopolitical tensions. Gold has also benefitted from elevated purchases by global central banks.
As the year draws to a close, investors will be keeping their fingers crossed for the appearance of a Santa Claus rally: the propensity for stocks to post positive returns over the last five trading days in December and first two in January. Since 1950, the S&P 500 has had a positive return over those seven days in 58 out of 75 years, or 77% of the time, with an average gain of ~1.3%.
