S&P 7000: A Week Away, or Just Wishful Thinking?
The stock market's got a spring in its step heading into December, and the bulls are already talking Santa Claus rally. The S&P 500 is flirting with record highs, and some are even suggesting it could hit 7,000 this week. Ed Yardeni, a market vet, thinks it's doable, pointing out that the index has crossed back above its 50-day moving average. He figures a 2.2% jump is all it needs. Given the nearly 4% surge last week, it’s not out of the question.
But let's pump the brakes for a minute. Optimism is great, but we need to look at what's *actually* driving this rally.
Rate Cuts, Trump's Pick, and Tennessee: A House of Cards?
The Fed, Trump, and Tennessee
The market's rebound, as it’s being called, is supposedly fueled by hopes of another rate cut later this month. Some Fed policymakers were hinting at a "wait-and-see" approach, but the market seems to be betting on more easing.
Then there's Trump. He's teasing his pick for Fed chair to replace Powell, whose term ends in May. He says he knows who he wants and will announce it soon. The rumor mill is churning, with Kevin Hassett, director of the National Economic Council, as the frontrunner. Prediction markets (Kalshi, specifically) put his odds at 66%. The market is interpreting a Hassett pick as a sign of more dovish policies, upping the odds of a quarter-point cut at the December meeting to 87%, according to CME's FedWatch tool.
And here’s where I get skeptical. (This is the part of the report I find genuinely puzzling.) Are we really pinning so much hope on who gets to sit in the big chair at the Fed? The market seems to be treating the Fed chairman pick as a magic lever that guarantees rate cuts. But even a dovish Fed chair can't conjure economic growth out of thin air.
Don’t forget about the special election in Tennessee. It's a tight race between Republican Matt Van Epps and Democrat Aftyn Behn, even though Trump won the district by a landslide last year. A Behn win would narrow the GOP's House majority and put affordability on the agenda. Another Democratic win on affordability could push Congress to extend enhanced Affordable Care Act subsidies to prevent insurance premiums from spiking next year.
Headline Hype vs. Economic Reality: A Data Dive
Beyond the Headlines: A Reality Check
So, we've got a potential Fed chair pick, rate cut expectations, and a special election all swirling around. But what's the underlying economic reality? Are these short-term catalysts masking deeper problems?
The yield on the 10-year Treasury rose 1.3 basis points to 4.032%. The U.S. dollar was down 0.04% against the euro and down 0.15% against the yen. Gold rose 0.1% to $4,259.50 per ounce. U.S. oil futures climbed 1.55% to $59.46 a barrel, and bitcoin dipped 0.39% to $90,450.
These numbers paint a mixed picture. Oil is up, which could signal some optimism about economic activity, but bitcoin is down, which could suggest some risk aversion. The dollar's weakness is interesting (down 0.04% against the Euro), and could be seen as a bet against US growth. Gold's slight rise—0.1% to be exact—points to a bit of hedging behavior.
The S&P 500 needs to rise by just 2.2% to reach 7,000. Let's break that down. The S&P 500 closed at 6,848 on Friday. A 2.2% increase would put it at 6,998.66, or roughly 7,000. Is it possible? Sure. Is it probable? That depends on whether you believe the market's current optimism is justified. According to some analysts, the
S&P 500 could hit 7,000 this week, depending on various factors.
Santa's Sleigh or Fool's Gold?
The market's riding high on hope. But hope isn't a strategy. The Fed chair pick and the Tennessee election are sideshows. The real question is whether the underlying economy can support these valuations. Until I see concrete evidence of that, I'm calling this rally a bit premature.
