As we approach the end of 2024, American stock market enthusiasts find themselves at a pivotal moment, with only 18 trading days left in the yearThe question on everyone’s minds is whether there will be another significant surge in stock prices before the year closes2024 has already been a remarkable year for the U.Sstock market, having witnessed a staggering 55 all-time highsHigh-profile analysts, such as Scott Rubner from Goldman Sachs, suggest there is potential for a 56th surge, spurred on by a combination of factors, including record inflows of capital, the return of retail investors after their Thanksgiving break, strong demand for stock buybacks from U.Scorporations, and notably low market volatilityIn fact, over the past 11 trading days, the market has seen an upward trend for 10 of those days.

Rubner points out that his "seasonal fund flow meter" is operating at full throttle, indicating that the phenomenon of "FOMO" (Fear of Missing Out) is beginning to take effect among investors as the year draws to a close

He believes that there are several key dynamics at play in the market as we approach the final weeks of the year.
1. The historical strength of seasonal performance in the stock market
2. Record inflows of capital
3. The rise of passive funds
4. Strong demand for stock buybacks from U.Scompanies until December 20
5. Low current market volatility
6. The return of retail investors from the Thanksgiving holiday
7. Current market liquidity appearing strong, yet typically seeing a decline in the final two weeks of the year.

The notion of seasonality is noteworthy in analyzing stock market trendsSince 1928, the S&P 500 has averaged a median return of 2.04% in December, with much of this positive performance occurring during the latter half of the month, where lower liquidity generally prevailsThis is not to mention a phenomenon known as the "January Effect," which designates the influx of substantial capital into the U.S

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markets in the first few weeks of the new yearSince 1928, the S&P 500 has seen a median return of 3.83% during that critical time frame.

Rubner expects that after the anticipated "January Effect" wanes, Goldman Sachs will release a bearish report on the state of the stock market by mid-January, but that is a concern for another dayFor now, the focus remains on the current dynamics driving the market upwards.

Rubner notes the remarkable levels of capital inflows into the stock marketHe asserts that there is currently a notable imbalance, with more buyers than sellers in the market — a rarity in typical trading environmentsIn the last four weeks alone, the U.Sstock market recorded $141.08 billion in inflows, setting a record for monthly inflowsIn stark contrast, non-U.Sequities and funds saw an outflow of around $8 billion during the same period.

This sustained momentum can largely be attributed to the emergence of passive investment funds

Thus far in 2024, passive funds have seen $589.4 billion in inflows, while active funds have witnessed an outflow of $210.2 billionOver the past decade, passive funds in the U.Shave cumulatively attracted $2.8 trillion, while their active counterparts have experienced a net outflow of $200 billion, a stark reflection of changing investor preferences.

Another significant contributor to the bullish sentiment in the market is strong demand for stock buybacks from U.ScompaniesRubner highlights that the "buyback blackout period" will commence on December 20, making November and December the most common months for increased stock repurchasesTo date in 2024, corporate stock buyback authorizations have totaled approximately $1.14 trillion, a 17% increase from the same time in 2023. Goldman Sachs predicts that total stock buybacks in 2025 will reach a vibrant $1.07 trillionAs Rubner comments, "Are stock certificates a scarce resource? Absolutely," indicating that the reduced supply from buybacks is likely to drive up the value of remaining shares.

When addressing volatility, Rubner estimates that traders hold an impressive $10 billion in gamma positions for every 1% fluctuation in the market — the highest level of gamma positions observed by Goldman Sachs to date

This suggests that there may be sufficient buffer against market weakness, with the current volatility levels having declined to the lowest since July, contributing to a steadier market performanceShould there be no unexpected shocks in the upcoming weeks, he anticipates a moderate increase in demand against a somewhat constrained supply.

The dynamic of retail investors returning to the market from their Thanksgiving break has also played a role in shaping current market sentimentToday, Goldman Sachs' fear index has reached a remarkable low, while call option trading has hit historic highs — clear indicators of a renewed enthusiasm among retail tradersRubner candidly admits to checking trending stocks on platforms like Reddit each morning, reflecting the rising tide of retail activity in the market.

Finally, while current market liquidity appears strong, Rubner warns that typically, liquidity declines significantly during the final two weeks of the year