Source: Jin10 Data

$S&P 500 Index (.SPX.US)$Just concluded its best performing month in a year, with expectations of a 30% increase in 2024.

Although the US stock market has already exceeded the most optimistic forecasts released at the end of 2023, some professional market observers still believe there is further room for the upward trend before the New Year bells ring.

Goldman Sachs' Scott Rubner mentioned in a report to clients last week that the S&P 500 Index may reach 6200 points by the end of December.

Renowned Wall Street bull, Tom Lee from Fundstrat, is even more optimistic: he expects this index to climb to 6300 points, although there may be some bumps along the way.

Lee is one of the earliest strategists on Wall Street to be bullish on stocks during the peak of the COVID-19 pandemic, accurately predicting the rise of the US stock market last year, gaining great fame and earning the nickname "Wall Street's oracle".

Li said in a report shared with MarketWatch: "In the short term, we may enter a 'hesitation range', but we recommend investors to buy on dips during this period."

Li bluntly acknowledged obstacles ahead. This Friday's employment report, next week's inflation data, and the Fed's interest rate decision later this month will bring significant uncertainty.

However, history shows that the US stock market has a strong upward trend in December. According to Liz Ann Sonders of Charles Schwab, since 1928, the S&P 500 index has averaged a 1.3% increase in the last month of each year.

More importantly, the index closes with gains in December 74% of the time - the highest winning month among all months.

An indicator of investor sentiment shows that enthusiasm for US stocks has recently cooled. According to the latest weekly survey by the American Association of Individual Investors (AAII), only 37.1% of respondents said they were bullish, below the historical average.

But Li pointed out that this relatively pessimistic sentiment may actually be a bullish signal.

He said: "This is a contrarian bullish signal. For me, as the stock market has risen in the past two weeks while sentiment has turned more bearish, this is a positive signal."

Li added that if everything doesn't go smoothly, a double safety net should help limit losses - both the 'Fed put options' and 'Trump put options' should help ensure that any market decline can be quickly bought into.

"Federal Reserve put options" refer to actions taken by the Federal Reserve to protect investors from the impact of market turmoil. On the other hand, "Trump put options" refer to the incoming Trump administration viewing the stock market as a key barometer of success and therefore taking measures to ensure its continued increase.

The annual "Santa Claus rally" period may also help boost stock prices. Callie Cox, Chief Market Strategist at Ritholtz Wealth Management, points out that since 1950, the probability of the S&P 500 index rising during this period is 80%, higher than the average level for all seven-day cycles throughout the year.

According to forecasts for 2025 released in the past few weeks, Wall Street strategists expect US stocks to continue rising in 2025, although at a slower pace.

Professional asset management firms also seem to be pricing in more returns. Citigroup's data indicates that these specific investors have significantly reduced their bets on shorting the S&P 500 index in the futures market.

However, not everyone sees the year-end sprint as a certainty. Matt Miskin, Co-Chief Investment Strategist at John Hancock Investment Management, said that given the strong performance of the US stock market in 2024, some traders may be tempted to lock in some profits.

Given that the US stock market is currently very expensive relative to its fundamentals, professional fund managers may potentially move funds to cheaper markets.

Miskin stated, "There may be some rebalancing effects in the market by the end of the year."

In addition, Miskin also sees a risk that Federal Reserve Chairman Powell may hint at a slower pace of interest rate cuts in 2025, which could disappoint investors.

Editor / jayden