There’s an old Wall Street phrase, “news follows the tape.” It means that stock price movements often occur before news is widely known. That’s been happening to stocks. The S & P 500 has been drifting lower for a week. It’s been drifting lower on valuation concerns, concerns on potentially fewer rate cuts, stickier bond yields, and concerns about President-elect Donald Trump’s tariffs and potential appointments. Now, with geopolitical issues around Russia/Ukraine , there is another log on the fire. This definitely puts the nuclear threat squarely on the table. Geopolitics has finally inserted itself into the market. So why are stocks, particularly cyclical sectors like industrials, rallying mid-morning? Bulls seem to want to believe this most recent Russian threat will lead to a deal to end the war sooner. Others say positive headlines around the Middle East, with Iran reportedly agreeing to halt near nuclear bomb-grade uranium production, is also a positive. Either way, it means geopolitical issues are another factor inserting themselves into markets. But where does that leave the market? In a bit of a limbo. Nobody’s happy right now The bulls aren’t happy because the momentum has been broken and the tone is not as positive as after the election. While some sectors (banks) are holding onto their rallies, other sectors are getting sold every day: Consumer staples and health care, particularly big pharma, have been awful. The bears aren’t happy because the market has not given up enough, and they have a point: The S & P 500 closing high was 6,001 on Nov. 11, so we are a mere 2% below that. Pity the Wall Street strategists Pity the poor Wall Street strategists who are now writing their 2025 outlooks. They have an impossible job. In a normal year, most strategists are comically wrong in their outlook, because it is impossible to estimate where the market is going to be a year from now. There are simply too many variables. This year is not normal. There are a lot of moving parts, so there is an even stronger chance your forecast is going to be comically wrong because events are unfolding as you are writing and you don’t know how they will be resolved. So what do you do when the macro environment is shifting like quicksand beneath your feet, but you still have to put out a forecast? You mean-revert. Take a look at estimates for the small handful of brave souls who have already made 2025 forecasts. BMO Capital (Brian Belski) 6,700 Morgan Stanley (Mike Wilson) 6,500 Goldman Sachs (David Kostin) 6,500 UBS 6,400 Evercore ISI 6,600 (mid-2025) You’ll notice they all tend to cluster around 6,500? That is about 10% above the current S & P 500 level. What is the current average yearly return of the S & P 500? 10%. Tough call going into the end of the year I know everyone has read the studies, that there is an average rise in the markets of about 3% going into the end of the year after a presidential election. The S & P 500 is up 0.3% since the close on Election Day. But those are just averages. If it was that simple, “Let’s just buy the market and sell on New Year’s!,” everyone would be rich. It’s been a pretty clean story for most of the year: The economy has been reasonably strong, and earnings have been growing at 10%, and are still estimated to be up a healthy 14% for 2025. But geopolitics, tariffs, and Trump appointments have now greatly complicated the 2025 outlook, and the market is reflecting some of that uncertainty.