Profit from the Pros

By Kevin Matras
Executive Vice President

Stocks Closed Higher On Friday, Higher For The Week, And Mostly Higher For The Month

Stocks closed higher on Friday and for the week. And most of the indexes closed higher for the month, with only the Nasdaq missing the mark.

With only 1 more month left in the year, the indexes are on pace for another stellar year. YTD, the Dow is up 12.2%; the S&P is up 16.5%; the Nasdaq leads them all with 21.0%; and the small-cap Russell 2000 is up 12.1%.

And the odds are in our favor to finish the year on a strong note. Q4 is the best quarter for stocks. And December, especially with it being a post-election year, has a 77.8% likelihood of closing higher.

That doesn't mean there won't be volatility. But if we do see any weakness, I'd look at that as an opportunity to buy rather than a place to sell.

The next Fed Announcement comes next week on Wednesday, 12/10. With inflation becoming less of a risk (last week's Producer Price Index showed inflation easing with the core rate (ex-food & energy) coming in at 2.6% y/y, which is down from the previous report's 2.8%), and the labor market becoming the larger focus, that bodes well for another interest rate cut.

The CME's FedWatch tool now puts the odds of a 25 basis point rate cut in December at 86.4%, up from 81% earlier in the week last week, and 71% the week before.

In other news, early estimates show Black Friday shopping outpaced last year by roughly 5%, with online sales up 8%, and in-store sales up 1%.

Cyber Monday is today, and is expected to be up another 6% y/y.

Despite worries over inflation and tariffs, this underscores the resilience of the economy and the strength of the consumer.

Not surprisingly, corporate America is in good shape as well. We just finished another better-than-expected earnings season. And the outlook is for continued growth with Q4'25 up 6.8%; Q1'26 up 8.2%; and Q2'26 up 9.8%. Very supportive for the market.

As you know, we just came off of 2 years in a row (2023 and 2024) of back-to-back 20%+ gains in the S&P. And I'm expecting to be up another 20%+ again this year. With the market currently up 16.5%, that means there's still more to go for that to happen.

The last time we saw back-to-back gains of 20% or more in the S&P was 1995 and 1996. And it was followed by 3 more years of 20% gains. That was 5 long, glorious years of gains (a 220% increase), led by the tech-boom, driven by the internet and dot-com companies.

I see history repeating itself. Another transformational tech-boom, this one driven by AI. And quite frankly, I'm expecting another 20%+ gain this year, and for each of the next 2 years, if not more, after that.

It's an exciting time to be in the market.

So make sure you're taking full advantage of it.

See you tomorrow,

Kevin Matras
Executive Vice President, Zacks Investment Research

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