Key Insights:
- Investor flows signal strong confidence in large-cap stocks, as the Vanguard S&P 500 ETF (VOO) logged $20.82 billion in November inflows.
- Experts say S&P 500 is ready for a December rally to $7,200 amid Fed rate cuts and the end of quantitative tightening (QT).
- Bitcoin faces renewed downside risks, with analysts warning that its recent 30% decline, even as the Fed enters an easing cycle.
Over the past week, the S&P 500 has regained significant strength, rising to 6,850 levels and extending its year-to-date gains to 16%. With Fed rate cuts expected during the December FOMC meeting, analysts are hopeful of a Santa rally. Analysts are looking up to Bitcoin, which has underperformed the equity index and is trading down 2% since the start of 2025.
S&P 500 and US Stocks on Winning Streak
Despite the broader macro uncertainties, the US equity market has shown exceptional strength. The S&P 500, the largest Wall Street index, has now closed in positive territory for seven consecutive months. This marks the longest winning streak since 2018. The index has climbed 23.9% over this period, mirroring strong rally phases previously seen in 2009, 2013, and 2021.
Along with S&P 500, the Dow Jones Industrial Average has also recorded seven straight monthly gains. So far, December has been a strong month for the equities market. Analysts noted that if the momentum remains firm, we could be heading ahead for a Santa rally.
With the US Federal Reserve ending quantitative tightening (QT) on December 1, analysts are hopeful that liquidity conditions will ease. During a CNBC interview, Fundstrat’s Tom Lee stated that he expects the S&P 500 to hit 7200-7300 by the end of December.
“7,000 is only 2% for S&P. From here, I think 5% or maybe even 10% is possible in December,” said Lee. He noted that the current setup resembles September 2019, when markets surged more than 17% within three weeks of the Fed ending quantitative tightening.
Vanguard S&P 500 ETF (VOO) Clocks Second-Highest Monthly Inflow
The Vanguard S&P 500 ETF (VOO) recorded a net inflow of $20.82 billion in November, marking the fund’s second-largest monthly inflow in at least four years. The ETF has now logged five consecutive months of positive inflows.
Year-to-date, VOO’s net inflows have risen 17% to $124.29 billion, putting the fund on track for its largest annual intake since launch. Since early 2023, the ETF has registered only one month of net outflows.
The data reflects a continued surge in demand for U.S. large-cap equities. This comes as investors accelerate allocations at a record pace.
On the other hand, the $11 trillion asset manager made a surprise move by allowing crypto ETFs and mutual funds that invest in Bitcoin (BTC), Ethereum (ETH), Solana (SOL), and XRP. Vanguard’s policy shift, initiated in September, marks the firm’s first consideration of offering access to crypto ETFs. If implemented, the move would make regulated digital asset investment products available to more than 50 million brokerage clients.
Just as the Fed ends QT, the central bank pumped $13.5 billion in US banks. This marks the biggest liquidity injection since COVID-19.
Will Bitcoin Overcome Recent Weakness for December Rally?
Bitcoin price has taken a major hit over the past two months, dropping 30% from its all-time high. Over the past few weeks, the BTC price has been range-bound between $80,000 and $90,000.
Bloomberg analyst Mike McGlone warned that Bitcoin may face further downside as the market enters a Federal Reserve easing cycle. He noted that Bitcoin’s recent decline, nearly 30% since the Fed’s 25-basis-point rate cut on September 17, mirrors conditions seen in 2007.
Back then, the S&P 500 hit a fresh high following an initial 50-bp cut before ultimately falling more than 50% into the 2009 bottom.
According to McGlone, the historical pattern suggests that “don’t fight the Fed” could imply additional pressure on Bitcoin.
Bhushan is a FinTech enthusiast and holds a good flair for understanding financial markets. His interest in economics and finance draws his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In his free time, he reads thriller fiction novels and sometimes explores his culinary skills.
