The traditional Christmas rally in stocks typically occurs during the last five trading days of the year and the first two of the new year. However, Bank of America suggests that if the Federal Reserve meets investor expectations, the rally could start earlier. Investors are almost certain of a rate cut, with a 99.1% probability according to CME FedWatch.
Historically, December is the second-strongest month for U.S. stocks, with the S&P 500 rising 83% of the time during election years. Analysts believe the upcoming FOMC meeting is the final hurdle before the rally.
Despite strong economic indicators, some economists question the rationale for a rate cut. Yet, robust consumer spending is expected, supported by a 4% increase in average hourly wages in November.
