The US Christmas rally 2021: Exaggerated interest rate hopes are driving prices - but is there a threat to the stock markets in 2024?

The US Christmas rally 2021: Exaggerated interest rate hopes are driving prices - but is there a threat to the stock markets in 2024?

According to a report from finanzmarktwelt.de, the US stock exchanges reached new record highs during the Christmas season. Both the Nasdaq 100 and Dow Jones indexes have risen, while the S&P 500 is just a few points away from its record high. This positive trend is being driven by U.S. investors' optimism about falling interest rates. S&P 500 futures signal that a new all-time high is likely, further supporting expectations of a sustained Christmas rally.

However, whether expectations of falling interest rates are exaggerated is being questioned as the market is pricing in up to seven Fed rate cuts next year, while the Fed itself has signaled only three cuts in 2024. This shows the already sharply increased valuations of S&P 500 companies, suggesting that 2024 could be more difficult for the stock markets.

There are also concerns about an economic downturn, highlighted by massive gains in the bond market. Bond markets reflect expectations that the US Federal Reserve will have to cut interest rates sharply in 2024 to support the economy. This could lead to a difficult year for the stock markets as they assume a soft landing of the economy and a significant fall in interest rates, which may not come to pass.

The period after the Christmas rally could be rather difficult for the S&P 500, as seasonal factors suggest. A pullback in January would therefore not be a surprise, but a correction after the steep rise could reduce the overbought situation in the S&P 500. A return to the ranges around 4,630 and 4,566/44 points would therefore be possible.

It is important to note that the S&P 500 Futures Index has already risen to a new all-time high. However, a quick relapse carries the risk of a false breakout and a technical double top, which usually indicates a trend reversal. It is therefore important to closely monitor developments on US stock markets in the coming months.

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