Pennies From Heaven

In the year of our lord, 2025, investing hasn't always been easy or fun, but despite some of the volatility, equities are higher and on pace for third consecutive calendar year

double-digit return. This week, we turn our attention to the holiday season for the next few blog posts as we put a bow on 2025. The inspiration for this week's musings is the 1957 recording of "Pennies From Heaven" by Louis Prima. Here’s some trivia about the song:

• This song was originally written for the movie of the same title in 1936. It rose to #2 on the Billboard charts and actually received an Oscar nomination for Best Music, Original Song. The song was specifically written for crooner Bing Crosby, who also had the starring role in the movie.

• Since the original recording, the song has been recorded by other famous artists - Frank Sinatra, Louis Armstrong, Tony Bennet, Dina Washington, Dean Martin, Andy Williams, and Michael Buble. However, the version we'll focus on is the version recorded by Louis Prima in 1957. His up-beat, jubilant style recording was used in the holiday movie "Elf" in 2003 starring Will Ferrell.

• Despite the up-beat nature of Prima's version, his recording did not chart very high when it was originally released in 1957. However, when it was included in the movie "Elf" and on the movie's soundtrack, it rose to #33 on Billboard's Adult Contemporary chart.

• The song was originally written about the reminiscence of the best times (Roaring Twenties) and the encouragement not to give up, but to wait out the storm (Great Depression).

"If every time it rains, it rains, pennies from heaven (Shubby Doobby)

Don't you know each cloud contains pennies from heaven (Shubby Doobby)

You'll find your fortune falling all over town

Each red and yella umbrella is up up up up upside down and...

Trade them all for a pack of a gum, sunshine and ravioli (Macaroni)

If you want the thing you love, you must have a pizzioli baby

And when you hear thunder don't run under a tree

It be pennies from heaven, for you and for me"

Here's what we've seen so far this week...

Each Cloud Contains Pennies From Heaven. The start to November was a rough one, with the S&P 500 Index falling 4.1% for the first three weeks. Last week, markets moved

higher to finish November in the black. The correlation between Fed Funds futures and the S&P explains why the recovery took place. Prior to November, futures on a December rate cut had hovered around 80%. Fed speakers started hedging on whether a December rate cut would happen, so futures dropped to only a 30% probability for the December cut, pulling equities down with it. The Fed bolstered a December cut on November 20th, pushing the probabilities back up to 90%.

Many have speculated that the condition of the labor market provides the Fed plenty of room to cut rates further. However, despite headline layoff announcements, jobless

claims are not providing any danger signals as of yet. In fact, Initial Jobless Claims came in this week well below expectations. The market was expecting 219,000 claims, but the actual number was 191,000. That's the lowest weekly reading since September of 2022. The PCE Price Index for September was finally released and it showed that inflation was largely in-check as the year-over-year reading was just slightly higher at +2.8%, versus +2.7% in August. This should keep up on track for a rate cut next week, keep the bullish sentiment in play.

The consumer is showing off a bit as we enter the holiday shopping season. Online sales reached $44.2 billion from Thanksgiving through Cyber Monday, an increase of

+7.7% year-over-year. Approximately 202 million people shopped in stores and online over the first 5 days of the holiday season, beating prior records. The ramp up showed in the Redbook Sales figures as well, as the sales were up +7.6% last week on a year-over-year basis. That's the highest weekly reading yet in 2025. A strong finish for the consumer in 2025 will likely bode well for 4th quarter GDP.

When You Hear Thunder, Don't Run Under A Tree. The correction we saw in March-April of this year and the most recent pullback in November could have caused

investors to worry and make irrational decisions in the absence of sound financial advice. The reality is that improvement in breadth in both situations benefited those who stayed invested. The Zweig Breadth Thrust triggered in late April meaning that breadth among equities was a positive sign toward further moves higher. We are very close to another thrust triggering, but it looks like we might fall just shy if we don't get a substantial move higher today. However, even when we get an "almost" thrust trigger, equities 1 month and 2 months later are positive 100% of the time. This should bode well for a positive December finish.

Lending further credence to a strong finish for the year is the historical data when

equities are up greater than 5% on a year-to-date basis by the end of November in the first year of a presidential cycle. When this happens, December has been positive 100% of the time. The average return for the month of December in this scenario is +2.1%. So far, we are up approximately 0.8% the first week of December. If December provides a return in-line with history, it would be the third consecutive year with double-digit returns for equities. Volatility is the price we pay to invest. It often pays more to stay invested than it does to panic and make irrational investment decisions based on short-term market moves.

December is the 2nd strongest month of the year for equities, historically. This also makes the 4th quarter the strongest quarter of the year, historically. So far, we are up 2.9% for the 4th quarter. On average, the 4th quarter is up more than 4%, with an 80% positivity rate. There's typically a silver-lining to most dark clouds if one just has the fortitude to weather the storm.

Pennies from Heaven - Elf Style...

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Disclosures

The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.

Forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.

Any market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.

Past Performance does not guarantee future results.