US stocks (^DJI, ^GSPC, ^IXIC) are trading lower in the final trading days of 2024, threatening the Santa Claus rally that investors were hoping for. Interactive Brokers chief strategist Steve Sosnick sits down with Julie Hyman to examine what’s driving the end-of-year sell-off and what it signals about the 2025 market outlook. “What we’re seeing here is some asset allocation going on into year-end,” Sosnick says, explaining he thinks investors are reallocating due to tax considerations. He highlights that, despite the end-of-year sell-off, “the optimism is still out there” heading into the new year, and he hasn’t counted out a Santa rally to end 2024. He elaborates, “I’m not kicking Santa Claus out of the room right now, but I think the people are a little bit shaken” about the Federal Reserve’s hawkish outlook for 2025. He adds, “I think that’s got some people contemplating whether there’s a little more to the selling than just sort of end-of-the-year shenanigans.” Looking toward 2025, Sosnick says, “You’ve got all this good news priced in, and we have a lot of unknowns regarding the fiscal policy next year.” He notes that there will be several shortened trading weeks given the upcoming day of mourning for former President Jimmy Carter, Martin Luther King Jr. Day, and President-elect Donald Trump’s Inauguration Day. “For general investors, [the shortened trading weeks] just means you could get a little bit of extra potential for weirdness [in the market].”
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