Daily Stock Market Articles

Santa Claus Rally Fails to Call But January Barometer Holds the Key

Santa was a no-show for the second year in a row. But all hope for 2025 is not lost. Defined in the Stock Trader’s Almanac, the Santa Claus Rally (SCR) is the propensity for the S&P 500 to rally the last five trading days of December and the first two of January with an average gain of 1.3% since 1950. This indicator was discovered and first published by Yale Hirsch in the 1973 edition of the Almanac.

The lack of a rally can be a preliminary indicator of tough times to come. This was certainly the case in 2008 and 2000. A 4.0% decline in 2000 foreshadowed the bursting of the tech bubble and a 2.5% loss in 2008 preceded the second worst bear market in history. Down SCRs were followed by flat years in 1994, 2005 and 2015, and a mild bear that ended in February 2016.

Last year, in 2024, New Years jitters did not last throughout January and S&P 500 went on to log a second straight yearly gain in excess of 20%. Of the 16 down SCRs since 1950, 11 years have been up and 5 down, but the average gain is a tepid 6.1%. As Yale Hirsch’s now famous line states, “If Santa Claus should fail to call, bears may come to Broad and Wall.”

With the Santa Claus Rally a no show we will be watching for a positive First Five Days (FFD) and January Barometer (JB), the second and third legs of our January Indicator Trifecta. If these seasonal indicators are negative and the market does not rally as it normally does during this time, we may shift to a less bullish posture – if not outright bearish.

With two more January indicators remaining, we will reserve final judgement until the end of January when the JB result is officially known. As long as the JB is positive the prospects for 2025 remain reasonably good.

Full analysis and January Trifecta scenarios here: https://www.stocktradersalmanac.com/Alert/20250103.aspx

 

What Happens After Stocks Gain 20%?


“How do you like them apples?” Will Hunting in Good Will Hunting

Welcome to 2025! First off, 2024 was a great year for investors, but it was one of the weakest final five days we’ve ever seen and the worst since 2005. Not to mention Santa Claus didn’t come, which you can read more about here, but I’m not too concerned about that as of now. Remember, we didn’t see Santa last year and stocks still saw huge gains.



The Bad News
The S&P 500 made 57 all-time highs last year, which was the fifth most ever and most since 70 in 2021. Here’s the catch, a lot of new highs hasn’t been a good sign of the following year and many have pointed this out as a reason to be skeptical in 2025.



Since the S&P 500 moved to 500 stocks in 1957 there have been six other years that had 50 or more all-time highs and the next year was lower four times, with an average return the next year of only -1.5% those six times.

Chalk this up as a worry, yes, but let’s also put this in context.

The S&P 500 made a grand total of ONE new all-time high in 2022 and 2023. Looking at those other six years that had 50 or more all-time highs I found the two years before the big jump in new highs averaged another 34 all-time highs.

One other way to put it is the average number of new highs for any random three year period is 54. Which puts the 58 new all-time highs the past three years in perspective and what we’ve seen lately is perfectly normal.

Maybe I’m just a glass is half full type of guy, but the lack of new highs the two previous years is a big difference between now and those other years and another reason to think 2025 could be solid for the bulls and we’ll see a lot more new highs.

What About After a 20% Gain?
As you’ve probably heard a few times by now, stocks gained more than 20% for the second year in a row. Here’s something you might not have heard though, the returns the next year actually get better after a 20% gain.

That’s right, the average year gains 9.5% and is higher 72.0% of the time. This jumps to 10.6% and 81.0% after a 20% gain, suggesting better than average returns and the bull very well might have a little more up his sleeves this year. But taking this one step further shows that after back-to-back 20% gains the next year is actually up 20% on average and never lower. How about them apples?



Here’s the data for all the years after 20% gains. It is worth noting we’ve only seen back-to-back 20% gains four times, with three of those times taking place in the 1990s (and the other in the 1950s). Yes, that’s a small sample size, but I’d still rather know this than not know it.



The bottom line is history says not to be scared of 20% gains and the likelihood of 2025 seeing double digit gains (or more) is high.

What more good news? We are set to release our Market Outlook 2025 in exactly one week. Stay tuned and thanks for reading!

 

Stocks Wrestle with Rates Typical January Action So Far

Upbeat jobs data fanned inflation fears and a rate cut reality check. More people working and making money is actually a good thing. But the market continues to wrestle with rising 10-year Treasury bond yields and policy uncertainties as a new administration prepares to take over in Washington, D.C. The rise in 10-year yields is most likely the combination of firm economic growth and stubborn inflation. It has also further muddled an already murky monetary policy outlook.

Today’s kneejerk selling notwithstanding January has on average started out positive, but weakness then creeps in. Choppy trading and weakness have plagued January in recent years and post-election years. In post-presidential-election years, Januarys have been mixed. DJIA and S&P 500 slip to number #8 and average performance also dips. NASDAQ and Russell 2000 have historically performed the best in post-election year Januarys ranking #4 and #5 respectively with average gains exceeding 2%.

 

Small Business Expectations vs. Reality
Tue, Jan 14, 2025

This morning's release of the NFIB's Small Business Optimism Index for the month of December was expected to fall down to 101.4 versus a reading of 101.7 in November. However, the politically sensitive report has continued to surge following the election. The index rose all the way up to 105.1 to set the highest reading since October 2018. As shown below, small businesses have gone from being extreme pessimists six months ago to extreme optimists today.



Small business optimism has now surged 11.4 points since the October report, which is a record two-month increase in the history of the survey going back to 1986. As shown below, the only 2-month increases that even come close were a comparable 10.9 point increase in the wake of the 2016 election, a 9.7 point rebound in June 2020 after the worst of COVID lockdowns, and an 8.9 point jump in March 1991.



In the table below, we provide a breakdown of the levels of each category of the report in December as well as the month-over-month change and how those all rank as percentiles of their respective historical range. Obviously given the surge in the headline number, there were multiple categories that saw top decile month-over-month jumps in December.



As shown in the table above, the single largest jump of any category was for expectations for the economy to improve (the outlook for general business conditions). That index rose 16 points to reach the second highest level on record. The current reading is only one point below the record of 53 set in March 2002.



As the outlook for the economy improved dramatically, small businesses are increasingly thinking it's now a good time to expand. As shown below, 20% of firms reported that they view the next three months as a good time to expand. That is the highest share of the post-COVID era.

The NFIB provides a breakdown of the reasons small businesses have for their current expansion outlooks. For those with a negative outlook, 19% report that it is due to economic conditions with an identical percentage for those reporting an uncertain outlook. In both cases, those were the most common reasons given. Alternatively, for those that gave a positive expansion outlook, only 4% reported it was due to the economy whereas an overwhelming 10% indicated it was due to the political climate. In other words, small businesses see now as a good time largely due to changes in the political, rather than economic, landscape.



As we have frequently noted in the past, one downside to the NFIB survey is the presence of extremely strong political biases, especially in the past few election cycles. Historically, the index and its components have been stronger during Republican administrations and weaker during Democrat administrations, hence the recent surge following President Trump's win this past November. With that said, certain categories of the report (which we highlighted in today's Morning Lineup) have tended to be less politically sensitive.

In the charts below we standardize and average across the individual categories of the report those that measure "actual" changes to the businesses (i.e. - actual earnings changes, actual sales changes, actual employment changes, etc.) versus those that survey on "expectations" or "plans" (i.e. - hiring plans, expect economy to improve, etc.). As shown, while both indices for expectations and actuals have risen significantly in the past couple of months, it's the former that has seen the more pronounced move. As a result, the spread between expectations and actuals hit a record high in December. That means in the history of the survey, there has never been a time in which small businesses reported stronger optimism and expectations relative to what they have actually reported is going on within their businesses.

 

Martin Luther King Jr. Day: Market Generally Better Before

Overall the market has been somewhat more positive, on average, on the Friday before MLK day and weaker the Tuesday after. Though trading is rather mixed with a relatively even split of ups and downs on the day before and the day after. DJIA has been notably weak on Wednesday and Thursday after, down 17 times in the last 27 years. This mixed and choppy performance is possibly due to the fact that MLK day can either land in options expiration week or the week after. Both weeks have been rather volatile and weak since 1999.

This year will be the 28th year that the stock market will be closed to honor Dr. King and his contributions to the world and civil rights. Martin Luther King, Jr. Day has only been observed since 1998 and market behavior around this holiday has not been added to the Stock Trader’s Almanac yet. We wanted to share with you the history of market performance around this holiday.

 

Softer Inflation Puts January Barometer in the Black

Up Januarys are followed by up years 88.9% of the time (40/45 years) with an average S&P 500 gain of 17.0%. Perhaps the Fed was sandbagging a little over the past month, resetting the market’s expectations on rate cuts. Lower core CPI ignited stocks. Headline CPI was a tick above expectations, but even at today’s monthly 0.4% rate Inflation Projections look tame 1st half 2025. Today’s rally may end the 6-week correction that shaved 4.3% off S&P 500, 5.6% off NASDAQ, 6.8% off DJIA and 10.4% off Russell 2000.

That 10-Year Treasury yield which wreaked havoc on stocks pulled back significantly from its high a couple days ago. Sentiment, which is often a contrary indicator, especially when its bearish, has also flipped from rather frothy levels to nervous these past several weeks with Investors Intelligence Bullish % tumbling to 42.4% from a high of 62.9% in early December. Bears are up to 32.2% from 16.1% and Correction is up to 25.4% from 19.1%.

The market has also wrestled with uncertainty related to the transition to Trump 2.0 and geopolitical hotspots. Next week’s inauguration and the news today of a hostage deal and ceasefire in Gaza may also be helping to alleviate some of the market’s recent jitters. Technically the market appears to have found support around the election breakout gap around S&P 500 5775.

 

Homebuilder Sentiment Improves and a Death Cross Nears
Thu, Jan 16, 2025

One of the later data releases this morning was homebuilder sentiment from the NAHB. The NAHB's Housing Market Index was expected to come in slightly weaker versus last month, falling to 45 versus 46 in December. Instead, it rose one point, which marks the highest reading since April.



At current levels, homebuilder sentiment is basically in the middle of the past three years range, but that also ranks only in the 31st percentile of all months in the index's 40 years of history. This month's improvement in the headline number came on increases in both present sales and traffic. But countering that was future sales plummeting six points to a three-month low.



Below we show the spread between future and present sales indices. In December, that spread surged to the highest level on record, meaning it was a historically optimistic outlook from homebuilders contrary to what was being reported for present sales. The inverse moves this month marks a reversal in that spread, although it is still at one of the highest levels in over a decade.



Geographically, homebuilder sentiment was mixed in January with declines in the South and Midwest countered by an increase in the West and a big jump in the Northeast. As shown below, sentiment is currently the highest in the Northeast. In fact, that index is now at the most elevated level since May 2022. That compares to other regions in which current readings are more middling versus recent years' readings.



Turning over to homebuilder stocks, the group proxied by the iShares Home Construction ETF (ITB) had opened lower and hit intraday lows right before the NAHB report was released, but the stronger than expected reading has sent shares higher as it is now up 0.23% on the day. Albeit ITB is up today, that is only putting a small dent in what has been a dramatic drop recently.

As shown below, the ETF was hit hard during the recent run up in rates over the past two months and at points was trading at historically oversold levels. The first of homebuilder earnings earlier this week offered some respite as KB Homes (KBH) reported a top and bottom line beat after the closing bell Monday (we also covered the company's conference call in one of our latest Conference Call Recaps). The stock is up over 7% since reporting and the broader group using ITB is up a similar degree in that time. With that said, recent declines have done their damage. The 200-DMA has begun to roll over and the 50-DMA has already been falling sharply. Currently, ITB's 50-DMA is only 36 bps above that longer term 200-day moving average, putting the ETF on watch for its first death cross since March 2022.



The homebuilders are a rate sensitive area, meaning price action recently and in the near future is likely to be heavily impacted by where rates go. With that said, earnings are also always a catalyst. Below we show a snapshot of our Earnings Explorer and the next S&P 1500 Homebuilder stocks scheduled to report. As shown, these names have generally seen positive price action on earnings and for three of the five, guidance has impressively been raised over 10% of the time historically with solid EPS and sales beat rates to boot.

 

Big Returns in Surprising Places
Fri, Jan 17, 2025

Last weekend's Barron's had an article citing the fascinating results of a study from Arizona State professor Hendrik Bessembinder. In a recent paper, Bessembinder studied the performance of more than 29,000 stocks from 1925 through 2023 and found that most stocks lost money over time and that a small number of stocks are responsible for the majority of the market's long-term gains. Looking back at stocks with a minimum of 20 years of returns, the study found that Nvidia (NVDA) had the greatest annualized compound return, which should surprise no one. Looking further back, though, of the stocks that have been around since 1925, the three with the biggest gains were Altria (MO), Vulcan Materials (VMC), and Kansas City Southern (KSU). All three have generated annualized gains of over 14% (table below is from the paper). When you think of the market's biggest winners over the last 100 years, would you have ever guessed the trio would include a tobacco company, an asphalt company, and a railroad?

It's hard to imagine a sector of the economy that has been more out of favor in recent decades than tobacco. Given its addictive nature and how popular it was for most of the last 100 years, though, Altria's strength makes more sense. When it comes to Vulcan (VMC), it doesn't get less sexy than asphalt. Still, as the auto industry exploded over the last century, especially after WWII, and more Americans moved out of cities and into suburbs, none of it would have been possible without a company like Vulcan laying pavement. Just as networking companies have facilitated the movement of data around the internet since the late 1990s, companies like Vulcan and even Kansas City Southern can, in some ways be thought of as the networking companies of the physical economy of the 20th century.

When the same study is conducted in 2125 looking at the best-performing stocks since 2025, will NVDA be as exciting as a tobacco or asphalt company is now? If not, which companies of today will end up as the leaders of the next century?

 

Market Bounce After December Low Breach Encouraging

DJIA closed below its December closing low (page 36 STA 2025) on Friday, January 10, 2025 for the 39th time since 1950. Historically, this event has been associated with further market weakness. And with the Santa Claus Rally (SCR) failing to materialize this year our seasonal indicator antennae have been twitching. But S&P 500 did register a positive First Five Days (FFD) putting our January Indicator Trifecta at 1 for 2 so far with the full-month January Barometer (JB) holding the key. All three Trifecta components are based on the S&P 500 on a closing price basis.

This week’s softer inflation readings from PPI and CPI removed some of the market’s fears that sticky inflation would cause the Fed to hike rates. The 10-Year yield may have peaked here in the near term at least as stocks had their biggest one-day rally since the day after the election. Stocks appear to have found support around the election breakout gap around S&P 500 5775.

Reviewing the data associated with both the DJIA December Low indicator and the January Indicator Trifecta we found that there were only four other prior years that had a down Santa Claus Rally, a close below the prior DJIA December closing low and positive First Five Days and/or January Barometer: 1980 both FFD and JB up, S&P 25.8%, 1991 FFD down, JB up, S&P 26.3%, 1993 FFD down, JB up, S&P 7.1% and 1994 FFD and JB both up, S&P -1.5%.

In the above chart of the 30 trading days before and the 60 trading days after DJIA closed below its December closing low we have split the previous 38 DJIA December low crossings into four groups along with 2025 as of yesterday’s close (January 15) for comparison. With just four occurrences, years like 2025 have been second best on average with 1994 the big drag. The best performance was observed by the years that had the smallest decline after DJIA closed below its December low. Years with greater than a 10% decline after the cross had the weakest performance. Most importantly, it appears the quicker DJIA recovers after crossing below its December low, the better its performance was. DJIA’s quick rebound this year off the December low crossing is encouraging.

Using the same groupings to plot DJIA’s 1-year seasonal pattern we see nearly the same outcome. Full-year average performance is the best when one of the two remaining January Indicator Trifecta components is positive. Smaller declines and quick recoveries also lead to better full-year performance figures. Current readings are in line with our bullish forecast for 2025 with a base case of 8-12% and best case of 12-20%.

 

The US: Nicest House on the Block
Tue, Jan 21, 2025

President Trump's second term has officially begun. Since winning the election a little over two and a half months ago, the S&P 500 (SPY) has risen 5.42% through today. That's better than any of the other key country ETFs shown in the snapshot below. For the most part, these country ETFs have largely fallen since the US election with the two largest declines coming out of South Africa (EZA) and Brazil (EWZ). More broadly, emerging markets like these have significantly underperformed with an average decline of 8% versus only 1% for developed market countries. While most country ETFs have fallen since early November, in addition to the US, there are only four that are up on the year: Germany (EWG), Singapore (EWS), Canada (EWC), and France (EWQ). Canada's gains may come as somewhat of a surprise as the newly inaugurated administration has put the country at the center of tariff talks alongside the neighbor to the south, Mexico (EWW). We provided commentary on these topics in today's Morning Lineup. While EWC has risen, Mexico has been much weaker with a 6.5% decline since the election. Furthermore, Mexico (EWW) is currently the country ETF that's the farthest below its 52-week highs and closest to 52-week lows (3.71% away) of the ones shown.



In the chart below, we show the relative strength lines of the country ETFs for Mexico (EWW) and Canada (EWC) versus the United States (SPY). As shown, the two ETFs have seen relative performance drop since the election as tariff tensions have become more of a reality, but that weakness is in the context of longer-term underperformance that has been persistent throughout the past year.

 

Sentiment Swing
Thu, Jan 23, 2025

The S&P 500 has continued to press higher in the past week including attempts to push up to new highs in the past couple of sessions. As a result, sentiment has taken a bullish turn and has done so in dramatic fashion. As shown below, the American Association of Individual Investors (AAII) survey has seen big swings in bullish sentiment over the past few weeks. Starting in early December, bullish sentiment fell six weeks in a row culminating with only a quarter of respondents reporting as bullish last week. In this week's survey, 43.4% of respondents reported as bullish. In a single week, that entirely erases the past month and a half's drop as bullishness has rebounded ot the highest level since December 5th.



Former bulls had to go somewhere, and the recent decline in bullish sentiment resulted in bearish sentiment rising from a low of 30% at the start of December to a high of 40.6% last week. As for this week, bears fell back down below 30% for the first time since the week of November 14.



Given those readings in bulls and bears, last week the bull-bear spread was negative (meaning there were more bears than bulls) to the widest extent since November 2023. The rapid turnaround in sentiment resulted in this spread rising back up to 14.0 per the latest data. As with bullish sentiment, that is the highest reading since early December.



One thing to factor into this massive turnaround in sentiment is the S&P 500's return to record highs. As might be expected, historically sentiment leans much more bullish when the index is closer to a new high. In the chart below, we show the average reading in the bull-bear spread throughout the history of the survey dependent on how far the S&P 500 is trading below a 52-week high. As shown, the bull-bear spread has averaged dramatically more bullish readings when trading at 52-week highs and has likewise leaned positive only when the index was at least within a few percentage points of a new high; as is the case presently. That means the big swing towards bullishness is notable but maybe not exactly surprising with the S&P 500 returning to its highs.



While the context of where the S&P 500 is trading versus previous highs is important, that shouldn't steal the thunder from just how big of a move sentiment had this week. The chart below shows the week-over-week change in the bull-bear spread over the past two decades. As shown, this latest 29.2 percentage point jump is the largest since November 2023, and prior to that, every other such large move higher came before 2010!

 

Post-Election Best Year Since 1985 Bullish For 2025

We might be tempted by the post-election year’s notorious history as the worst year of the four-year cycle going back to the end of our database in 1833, the fifth year of Andrew Jackson’s presidency, to lean bearish for 2025. The full four-cycle “191-Year Saga” on page 132 shows that post-election years average a paltry 3.3% return over these past 48 election cycles and that many wars and bear markets have started in a post-election year.

But post-election years have improved since WWII and since 1985 DJIA averages a gain of 17.2% with eight up years and two down. This is the best average gain of the four-year cycle over this period, besting the pre-election year’s 15.2% average, though the pre-election year has nine wins and only one loss.

The one-year seasonal chart here shows the S&P 500’s performance during post-election years since 1949 paints a rather bullish picture for 2025. At this juncture I expect the market to be up 8-12% for the year with pullbacks in Q1 and Q3. I am concerned about inflation, valuations and the older weak post-election patterns, we expect the bull market to continue through 2025, though it will likely be a much bumpier ride than it has been the last two years.

 

Some Good News for the Bulls


“I am an optimist because I don’t see the point in being anything else.” Abraham Lincoln

What a start to 2025, nearly picking up where 2024 left off. Yes, stocks fell in December and during the historically bullish Santa Claus Rally period, but the S&P 500 just made another new all-time high and is up nearly 4% in January already.

Here are two bits of good news for the bulls as we all freeze across this great country.

The First Five Days Were Positive
Although you wouldn’t expect there to be much correlation here, the first five days of a new year can sometimes foreshadow how the rest of the year might go.

Since 1950, the first five days were in the green 48 times and the full year was higher 81.3% of the time and up 14.2% on average, both better than the average year gain of 9.5% and up 72.0% of the time. Digging in a little bit more, a negative first five days suggests virtually a flat year on average and higher only 55.6% of the time. This matters, as the first five days in 2025 were up 0.62%, suggesting some potential good news for the bulls.



Post-Election Years Have Been Strong Lately
Did you hear we had an election last year? That of course means this is a post-election year, a year that historically has just been kind of average. As you can see below, since 1950, most of the big gains took place in pre-election years, while midterms years could be trouble. So this means election and post-election years tended to be more along an average type of year.



Here’s where things get interesting though. In more recent times, post-election years have been very strong. Going back 40 years (to 1985) post-election years have gained more than 18% on average and have been higher nine out of ten times!



Here we broke it down by all post-election years going all the way back to 1897 and as you can see, only Bush in 2001 saw a negative return during this year in the cycle in more recent times.



To put a bow on this discussion, here are the returns for the four-year Presidential cycle since 1950 compared with the past 10 cycles. Post-election years are far and away the best performing year more recently.



What about taking the extra step and breaking it down by whether there was a new president versus a president in their second term? Here we found that stocks once again do much better in post-election years under a second term president, yet another positive for 2025.

 

2021-2024 Textbook 4-Year Cycle in The Books

With a 2021-2024 textbook 4-Year Cycle in the books I’ve reset the cycle to track 2025-2028. The traditional first-year slump hasn’t materialized since Ronald Reagan’s reelection in 1984.

This may be attributable to some compression of the cycle where first years have become like third years – a sort of midterm pre-election year. Midterm elections have become more important as incumbent presidents try to hang on to the slim congressional margins we’ve seen in recent years.

Q1 of post-election years and Q2-Q3 of midterm years have been notable weak spots with the sweet spot of the cycle running from Q4 midterm year to Q2 pre-election year.

 

AI Infrastructure Stocks Drop
Mon, Jan 27, 2025

The Nasdaq is down well over 3% as of this writing with AI hardware names driving the declines. The main AI infrastructure stock -- NVIDIA (NVDA) -- is down roughly 20% over the last two trading days, which equates to a drop of nearly $700 billion in market cap! Amazingly, news that DeepSeek out of China had built a ChatGPT-like product for a fraction of the cost was actually circulating weeks ago at the end of last year. It wasn't until this weekend, though, that the ramifications of this news started being debated heavily on social media platforms like X.

Our AI Basket is a set of 50 stocks with exposure to the AI Boom. The headline basket is further broken down into two sub-baskets: the Infrastructure basket and the Implementation basket. The former is comprised of stocks whose hardware and software lay the foundation for AI to work. These include companies that make semiconductors, data centers, cloud storage, and more. The Implementation basket, on the other hand, is made up of companies whose products are more oriented towards end-users of AI. This includes stocks with products like AI augmented software, copilots, automated services and the like.

Although AI stocks are down broadly today, it is the Infrastructure basket that has been hit the hardest. With DeepSeek's supposed low-cost to build its latest ChatGPT-like offering, it has brought into question the necessity for massive capex spend on chips and datacenters, and our AI Infrastructure sub-basket is down an incredible 8.2% on the day as a result! That compares to only a 1.5% decline in our Implementation sub-basket. As shown below, since the start of our AI Baskets a little over two years ago, this is easily the worst day for our Infrastructure basket relative to our Implementation basket to date, and it isn't even close. In tonight's Closer, we will provide a further look into the performance of the AI baskets in the wake of the DeepSeek discussion.

 

Post-Election Year Q1 Weak Spot Volatility Happens

China’s DeepSeek AI panic is just another trigger for a market selloff in the Q1 weak spot of Year 1 of the 4-Year Cycle. Following the solid gains of typical pre-election and election years, the flat to mildly negative Q1 of post-election years is a notable transition. Breaking the 4-year cycle down by quarterly performance in this bar chart gives a clear view of Q1-post-election-year weakness.

Potential reasons for this lull in the 4-year cycle are numerous, but the uncertainties of a new administration coming to Washington, D.C. are high on the list. The obvious reset of the cycle is a strong possibility. Two years of solid gains, fueled by election spending, result in elevated market valuation. This combination of big gains and an uncertain outlook has led to profit taking in the past and it is playing a role now. Not to mention economic, geopolitical, and monetary policy concerns.

But prospects for 2025 remain encouraging. Post-election years have improved since WWII and since 1985 DJIA averages a gain of 17.2% with eight up years and two down. This is the best average gain of the four-year cycle over this period. Despite today’s selloff my Base Case 2025 Forecast scenario is still the most likely with full-year 2025 gains of 8-12%. But gains are not as likely to be as free flowing as they were over the past two years and volatility is likely to remain elevated.