As 2024 draws to a close, U.S. stock markets are experiencing a notable downturn, with major indices retreating from their impressive annual gains. The S&P 500, which had surged approximately 25% this year, is now facing a December decline that threatens to undermine the anticipated “Santa Claus rally.”
This recent slump is largely attributed to a sharp rise in Treasury yields. The 10-year Treasury yield reached 4.62% on December 27, its highest level since May 2024, signaling investor concerns over potential inflationary policies under President-elect Donald Trump.
Despite these challenges, megacap technology stocks—collectively known as “BATMMAAN” (Broadcom, Nvidia, Tesla, Amazon, Microsoft, Meta, Apple, and Alphabet)—have provided some support to the market. These companies have collectively added over $1.9 trillion in market capitalization since the November election, driven by optimism surrounding AI advancements and anticipated economic policies.
However, the concentration of market gains in these tech giants has led to concerns about sustainability. Elevated valuations, coupled with rising borrowing costs due to higher Treasury yields, pose risks to continued growth. Investors are particularly wary of potential earnings disappointments and the long-term viability of substantial AI investments.
As trading volumes dwindle in the final days of the year, the market’s direction remains uncertain. The anticipated “Santa Claus rally,” typically occurring in the last five days of December and the first two days of January, has yet to materialize, leaving investors cautious.
In summary, while 2024 has been a remarkable year for U.S. equities, the recent downturn underscores the market’s vulnerability to macroeconomic factors and investor sentiment. The interplay between rising Treasury yields and the performance of megacap tech stocks will be pivotal in shaping market trends as we transition into 2025.
