Wall Street: what do record highs in the US stock market mean for investors?

US stock markets close on a high

United States (US) stocks wrapped up both the week and the month on a strong note, with the Dow Jones and S&P 500 hitting fresh record highs. In November, the Dow climbed an impressive 7.5%, while the S&P 500 reported a solid 5.7% gain, and the Nasdaq 100 followed with a 5.2% increase.

These gains signal growing optimism around Trump 2.0, as the former president gears up for potential action in 2025, aiming to fulfil his 'Make America Great Again' promise.

Trump’s agenda and market implications

Trump's social media posts last week highlighted that tariffs remain high on his agenda and are a preferred policy tool, likely due to the broad discretion they allow without needing Congressional approval. This approach suggests that tariff-related social media posts will likely continue, creating volatility across financial markets and presenting both risks and opportunities for investors.

Seasonal trends and upcoming events

In the near term, bullish seasonality favours further gains for US equities into mid-January. Historically, the last two weeks of December rank as the third-best two-week period of the year, averaging a +0.99% return. The first two weeks of January are even more positive, boasting an average return of 1.61%. Together, they create the most favourable four-week stretch of the year, with an average return of 2.6%.

Looking ahead, all eyes will be on the November non-farm payrolls jobs report and upcoming speeches from Federal Reserve (Fed) officials, including Chair Powell, as investors brace for potential market-moving insights.

Non-farm payrolls

Date: Saturday, 7 December at 12.30am AEDT

In October, the US economy added just 12,000 jobs, falling well short of the anticipated 113,000. This shortfall was partially due to hurricane disruptions, while strikes accounted for a 37,000 decline. On a brighter note, the household survey, presumably less impacted by hurricanes, showed the unemployment rate holding steady at 4.1%.

For November, the US economy is expected to add 200,000 jobs, with the unemployment rate possibly ticking up to 4.2%. The interest rates market is pricing in a 65% chance of a 25 basis point (bp) rate cut at the Federal Open Market Committee (FOMC) meeting on 19 December.

US unemployment rate chart

Nasdaq 100 technical analysis

Provided the Nasdaq 100 remains above the mid-November 20,315 low and above medium-term support at around 19,850 - 19,650, we expect to see the index to retest and break its 21,182 record high before moving towards 21,500.

A sustained break below 20,315 and then below medium-term support at 19,850 - 19,650, would warn that a deeper decline is underway towards the 200-day moving average at 19,122, reinforced by trend line support at around 18,825. Below that, there isn’t much in the way of support until the August low of 17,453.

Nasdaq 100 daily chart

S&P 500 technical analysis

Last week, the S&P 500 hit fresh record highs before closing the week above 6000 for the first time. Given the strong seasonality, we expect these gains to extend into year-end.

If the S&P 500 holds above the mid-November low of 5853 and above a band of medium-term support at 5700 - 5650, we expect the uptrend to extend towards 6150. Beyond that, there is weekly trend channel resistance at 6250 – 6270.

Be wary if the S&P 500 first breaks below the previous week's low of 5853 and then below horizontal support at 5760–5750, indicating a deeper pullback towards 5550–5455, which includes uptrend support from the October 2023 low of 4103 and the 200-day moving average.

S&P 500 daily chart

• _{Source: TradingView. The figures stated are as of 2 December 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}