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Investors who were in business in 2009 could have déjà vu this year.
This is because the previous 2020 run of the S&P 500 has eerily followed the market path in 2009, with similar slumps and rallies as strategists have pointed out. Randy Frederick, Charles Schwab's vice president of trading and derivatives, is one of those forecasters who has long been highlighting the roadmap's accuracy this year – and even he's a little surprised.
"Amazingly, it never really went off for more than a few days," says Frederick Fortune. "I've always expected it to break down at some point, but to be honest, it just never worked out."
Since this pattern is "going on for a lot longer than I thought," Frederick believes, "it's pretty late in the game to think it'll be off quite a bit," by the end of the year, with about four weeks to trade.
With a sell-out until the end of November, this card still lasts.
“This is exactly what I was expecting: as soon as we hit that new high (S&P 500) or were close to it, I thought we might get into a sideways, choppy phase that could last two to four weeks, and it seems as if we & # 39; I'm at it now, ”says Frederick.
Surely what is driving this year's market is "completely different" from 2009, notes Frederick, with a pandemic (not a man-made financial crisis) moving markets from red to green year-round and record-breaking bear markets and rallies.
However, based on the pattern, Frederick believes the market will finish the year even higher – even if it's not a smooth ride.
A restless December?
Despite a sell-off on the last day of the month (with the S&P 500 down 0.46% and the Dow nearly 1%), stocks rose nearly 11% in November, in line with the historic precedent that November was in the election year is a strong month for investors.
And when that happens, the story goes, "December traditionally retains that aura of optimism," CFRA's Sam Stovall wrote in a Monday note. However, "DJIA, S&P 500 and Russell 2000's recent three-way all-time highs combined with oversized gain for the S&P 500 in November," could mean investors near the holidays won't get as big a gift .
In December, "history warns but does not guarantee that progress could be dampened in December," CFRA's Stovall writes. "Whenever the S&P 500 gained 5% or more in November, which has happened 14 times since 1945, the price increase in December and the frequency of the advance payment were below average." (See table below.)
Aside from historic gains for December, the remarkable similarity in 2020 and 2009 market runs suggests December could be a bit bumpier for stocks, notes Frederick. However, if the S&P 500 holds its course, Frederick predicts shares will be around 3,700 by year-end, up around 2% from Monday's close.
Plus, there's always a change in what's called a Santa Claus rally to boost stocks in the last few days of the year.
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