The final three months of 2024 have commenced, and Wall Street is experiencing notable highs. The S&P 500 reached a new record on Monday, registering a year-to-date increase of 20.8%, excluding dividends. This marks the benchmark’s most substantial gain through the first three quarters since 1997, reminiscent of the dot-com boom, according to Bespoke Investment Group. Ryan Detrick of the Carson Group highlighted that it represents the highest nine-month gain for the index in an election year based on historical data from 1950. Additionally, the Dow Jones Industrial Average and Nasdaq Composite have recorded substantial gains over the same period, with the Dow rising by 12.3% and the Nasdaq by 21.2%.
Several factors have contributed to these significant increases, including enthusiasm about the potential of artificial intelligence to enhance corporate profits and the prospects of a more lenient monetary policy from the Federal Reserve. Last month, the Federal Reserve reduced rates by half a percentage point, and traders anticipate further cuts before the end of the year.
However, investors will need to navigate seasonal pressures in the coming month. A CNBC Pro analysis of FactSet data dating back to 1950 revealed that October is typically the most volatile month, with the S&P 500 averaging daily moves of 1.3% in either direction. Some investors are also hedging their portfolios in anticipation of a contentious U.S. presidential election. Amy Wu Silverman, head of derivatives strategy at RBC, indicated that her clients are preparing for “3 standard-deviation drawdowns” in the coming weeks. She mentioned that the market is on edge, as evidenced by the increased demand for hedging, seen in metrics like the Cboe VIX of VIX Index (VVIX), which measures the volatility of the Cboe Volatility Index (VIX) itself, a key indicator of investor fear.
On a different note, Pivotal Research Group initiated analyst coverage of Alphabet, the parent company of Google and YouTube, with a buy rating. Pivotal analyst Jeffrey Wlodarczak noted that Alphabet is in a strong competitive position with its dominant core search business model, holding roughly 90% market share excluding China, and a clear path to leveraging its significant global device presence and robust AI platform. The company’s financial strength also positions it well to incentivize handset manufacturers for default AI placements.
