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Why Christmas may have come early this year for investors

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The major indexes ended mixed on Wednesday, as the S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) remained within spitting distance of their respective 2023 highs. Notably, it was the sixth straight day that the entire day's range in the S&P 500 clocked well under 1%.

Christmas may have come early for stocks this year.

Normally, markets slow to a crawl in late December, as Wall Street traders abandon their trading desks for their families. And the drop in volatility usually kicks off a year-end rally colloquially known as the Santa Claus rally.


This year, expectations remain bullish. But given the monster rally we've seen this month, at least one analyst is warning that a Santa Claus rally is probably no longer in the cards.

Amanda Agati, PNC Asset Management Group chief investment officer, joined Yahoo Finance Live on Tuesday to comment on the blistering rally that manifested in November. She said that she does not see a catalyst that would meaningfully extend the rally into year-end. She also reasons that the Federal Reserve will likely sit on the sidelines and not take any policy action in its final decision of the year in a few weeks.

"I think what we're left with is a bit of a rangebound kind of choppy market from here through year-end," said Agati.

If the entire Santa rally has been brought forward by a month, that would be a fitting, final head fake for a year that has managed to confound analysts, strategists, and money managers from the very start.

After all, coming into the year, Wall Street was projecting that stocks would end the year in the red and investors in the S&P 500 would actually lose money over the next 12 months.

Negative return predictions at the start of a year are practically unprecedented on the Street. But a year ago, this was quite understandable given we were in one of the worst years ever for a 60/40 portfolio of stocks and bonds.

But early in the year, the Magnificent Seven rode in to town on an artificial intelligence wave of enthusiasm that kicked the bears in the teeth. The 2023 bull market was narrow for most of the year but broadened out in November, as portfolio managers were forced to chase their benchmarks. (As of Wednesday, the S&P 500 was up nearly 20% for the year, and the Nasdaq 100 (^NDX) was up an astonishing 45%.)

In November, nearly everything except energy stocks and volatility are up. Cathie Wood's Ark Innovation ETF (ARKK) — the poster child of roller-coaster pandemic investments — has gained an eye-watering 34% in November. That's its best month ever going back to 2014.

But Agati believes the big 2023 finale that some may be waiting for has already arrived.

"Our view is we probably won't see a Santa rally materialize because we already got that turkey rally," she said.

But don't tell that to Carson Group's Ryan Detrick, who just highlighted the palpable drop in volatility that has admittedly left markets a bit boring.

"What's that thing they say about shorting a dull market?" he quipped rhetorically.

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