The stock market has seen quite the rally towards the end of 2023, with inflation cooling and Federal Reserve leadership signaling rate cuts next year. In addition, according to the Fed's latest survey of consumer finances, more Americans are investing in the stock market than ever before, with 58% of American households holding stocks. Yahoo Finance Reporter Jared Blikre joins the Live show to break down the latest numbers with volatility (^VIX) and how it relates to stock market performance, as well as how more interest among American investors in the stock market -- and $6 trillion saved in cash -- could fuel more stock market gains.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

RACHELLE AKUFFO: Well, taking a look at stocks moving relatively flatly as we near the final trading days of 2023. After seven straight weeks of markets rallying, will stocks build on that momentum into year end? Joining us now with more is Yahoo Finance's own Jared Blikre. Hey Jared.

JARED BLIKRE: Hey Rachelle. And just take a look at what's supposed to happen in the month of December, lift off in the back half of the month. Well, that's where we are now. But you might correctly remember that we are in the midst of a nice rally. In fact, if I plotted what has already happened in December, it would look something like this. It would be over 3% for the S&P 500 basically off the charts there.

But if we do have historical norms interplay here, we should get additional rallies into the end of the year. There have been arguments that some of that has been brought forward already all the way back to Thanksgiving, but we see the incredible bullishness in the markets just continue.

And here's another way to look at. This is the S&P 500 average performance since 1950. This is the VIX average performance for the entire year going back to 1990. And we can interplay that with what's happened this year, that's in purple. And you can see into the end of the year-- and I've shown this chart quite a bit-- we do tend to see a depressed VIX and then we get a little bit of a pop there.

And it's worth remembering what happens in January because the Santa Claus rally that we talk about, that's actually the last five days of December and the first two trading days of January. And then we have something called the January effect and the first five days of trading.

Suffice to say that January is a very important bellwether for the entire year, there's a lot of political activity that's concentrated in the month of January. When we do have elections, new political officers and people in Congress come in January, we have the State of the Union, that didn't used to be until later in the year. So all of these things tend to concentrate in January, and that's why it just has such prognostication ability for the rest of the year.

And if we take a look at what's happened this year so far, I don't think anyone at the start of the year would have said, all right, well, after the drubbing we took last year, we're going to see Bitcoin up 150% and we're going to see the New York FANG index, which is basically the Mag 7 up almost 100%. I don't think that was necessarily in the cards, but nevertheless we are here.

Innovation doing well. That's the ARKK, that's up 62%. SOXX that's computer chips, and software homebuilders for a little bit of diversification there. It's not all-tech stocks, homebuilders as well. So really interesting to see how this year has played out and lots of expectations for the new year as well.

AKIKO FUJITA: Yeah. Plenty of positives to take away from there. Jared, as we count down to the end of the year, we're seeing the way people are invested in the market shifting. What are we seeing in terms of stock ownership?

JARED BLIKRE: Well, Akiko, we just got this print. We have almost 60% of Americans households owning stocks. And this is up from 30% in 1989. So this is a longer-term trend, and what I think is interesting here is that we really trended sideways once we hit the dotcom boom and then bust, and we can see we had this big rise in stock ownership into the late '90s.

But after we got the dotcom bust, we kind of leveled out through the global financial crisis, had a few zigs and zags. Did not really anticipate that we would accelerate because of the pandemic, but that's nevertheless what happened. And that has to do with the GameStop episode and the rise of the retail trader that has taken stock elevate-- that has elevated stock ownership to an entirely different level.

And now, I just want to show another chart. This is the retail can't on the sidelines. This has to do with the money market fund total net assets that are being held to take advantage of these high 5% rates. Well, if that money were to come into stocks, the reasoning goes, well, there's a lot of dry powder on the sidelines.

Doesn't mean that stock ownership necessarily would go up. It doesn't mean that all households in America would own stock. And arguably the households that have the most money are probably already owners of stock, but that doesn't mean that the dry powder that they would have any less of an effect.

So as far as the expectations for the new year, I think it's going to be another year for the retail trader without all the hiccups and the bumps that we had in 2021. Kind of a coming of your own year for not only retail traders, but also for crypto, which is finally entering out of that coming out of that crypto winter and into the crypto spring. So lots of anticipation here for the new year.

AKIKO FUJITA: All right. Jared with some of his forecasts for 2024. Jared Blikre, thanks so much for that.