Goldman Strategist Says U.S. Stock Market Rally Will Continue in the Final Weeks of 2024

U.S. stocks are poised to extend their record-breaking run in the final trading days of 2024, driven by unprecedented inflows into index funds, a surge in corporate buybacks, and an increase in retail trading, according to Goldman Sachs’ top technical analyst, Scott Rubner.

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Rubner likened the ongoing rally to Cyber Monday sales that keep extending. “Cyber Monday deals keep getting extended, and the U.S. equity market rally is no different,” he remarked. His comments came as the S&P 500 reached its 56th all-time high of the year on Wednesday, continuing its upward momentum by posting gains in 10 of the last 11 trading sessions.

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Since its inception in 1928, the S&P 500 has historically experienced a median gain of 2.04% in December. This trend often extends into early January, pushing the average two-month gain to a median of 3.83%, Rubner observed. The data suggests that the current rally could have further room to grow before 2024 concludes.

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On Wednesday, the S&P 500 index closed at a record high of 6,086.49, marking a gain of 36.61 points or 0.61% for the session. Year-to-date, the index, which tracks the 500 largest U.S. publicly traded companies, has surged by 28%, underscoring the strength of this year’s bull market.

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Rubner attributes the rally to a fundamental shift in market dynamics, with significantly more buyers than sellers. This imbalance has been fueled by massive inflows into U.S. mutual funds and equity-focused exchange-traded funds (ETFs). Over the past four weeks alone, ETFs and mutual funds have attracted a record $141.8 billion in new investments.

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This surge in passive fund inflows is part of a broader trend for 2024. Passive funds have amassed $589.4 billion year-to-date, while actively managed funds have suffered outflows totaling $210.2 billion over the same period. This shift highlights a growing preference among investors for passive strategies tied to index performance.

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Corporate buybacks have also played a significant role in supporting the market. By the end of December, America’s leading companies are expected to have authorized $1.14 trillion in share repurchases for the year, a 17% increase compared to the same period in 2023. According to Rubner, November and December represent the strongest two-month stretch for corporate buybacks, with firms demonstrating heightened demand for their own stock.

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“Are stock certificates a scarce resource? Absolutely,” Rubner emphasized, highlighting the limited supply of shares amid robust buyback activity.

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Adding to the bullish outlook, retail trading activity is making a comeback. Rubner pointed to an uptick in participation from individual investors, who may have additional time during the holiday season to trade in popular, high-performing stocks. He noted that Reddit forums, known for influencing retail trading trends, have once again become a source of interest for his team. “I am back to checking Reddit every morning to see the names of the day,” Rubner said, expressing optimism for the remainder of the year.

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Another key factor contributing to the rally is a systematic re-leveraging in the market, prompted by historically low levels of volatility. Rubner described this shift as a significant driver of increased demand for U.S. equities. “The volatility market is now a player on the field, the quarterback, not the coach on the sideline,” he remarked, underscoring the active role of market conditions in fueling the rally.

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The convergence of these factors—record fund inflows, corporate buybacks, rising retail participation, and low volatility—has created a favorable environment for U.S. stocks. As the year winds down, these dynamics suggest that the market’s strong performance may persist into early 2025.

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Rubner’s analysis offers a snapshot of the unique conditions shaping the U.S. equity market. Record inflows into passive funds demonstrate the dominance of index-based strategies, while increased corporate buybacks reflect confidence among companies in their financial health and stock valuations. Simultaneously, the resurgence of retail trading activity highlights the continued influence of individual investors, particularly during periods of high market enthusiasm.

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While risks such as potential shifts in volatility or unexpected macroeconomic developments remain, the near-term outlook for U.S. stocks appears optimistic. The combination of supportive structural trends and investor sentiment has positioned the market to capitalize on its recent momentum.

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As the S&P 500 continues to notch record highs, Rubner’s insights serve as a reminder of the factors propelling the current rally and the importance of understanding market dynamics in navigating future opportunities. With just over two weeks left in the trading year, the stage is set for U.S. equities to close out 2024 on a historic note.

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