Stock Market Poised for Strongest Rally Since 1985

In a remarkable turn of events, the current stock market rally is on track to become the most robust since 1985, with the S&P 500, Nasdaq 100, and Dow Jones Industrial Average all set to notch nine-week win streaks that began on October 30, according to financial analytics firm Bespoke.

As of Friday morning, both the S&P 500 and Nasdaq were poised for their ninth consecutive positive week, a feat not accomplished in tandem since late 1985. The last instance of such prolonged success was when the S&P 500 and Nasdaq 100 posted 11-week win streaks in 1985, based on data dating back to 1971.

For the current weekly win streaks to endure, the S&P 500 and Nasdaq 100 need to close above 4,754 and 16,777 by Friday's end. While they were slightly above their closing levels from the previous week as of Friday morning, the final trading day's outcomes will determine the fate of this exceptional market performance.

The ongoing rally began on October 30 and has demonstrated remarkable strength. During this period, the S&P 500 and Dow Jones have seen a substantial increase of approximately 15%, while the Nasdaq 100 has experienced an even more significant surge of about 17%.

Several factors have contributed to this bullish market sentiment, including data indicating a sustained decline in inflation, robust third-quarter earnings, and a dovish pivot from the Federal Reserve. These elements have fueled investor confidence and propelled the stock market to impressive heights.

As the year ends, there is speculation about whether the weekly win streak will extend into 2024. While the future trajectory remains uncertain, Tom Lee from Fundstrat suggests that more gains in early 2024 are likely before a modest pullback materialises in February or March. Lee points out that the S&P 500 is currently within 1% of its all-time high of 4,801, and historical data suggests that in similar instances, the index quickly made new all-time highs. According to Lee, this pattern could potentially result in new highs by January 2024.

The remarkable performance of the stock market in recent weeks has captivated investors and analysts alike, leaving many to closely watch the evolving trends as they unfold in the coming days and into the new year.