The stock market has been flourishing lately, but that doesn’t mean the financial scam artists are taking a rest. In fact, it’s during bull markets when they’re the busiest.

Just a glance at the news headlines will tell you that corporate fraud, profiteering, and misconduct are running rampant. Consider Sam Bankman-Fried, the poster child for cryptocurrency shenanigans.

The tousled-haired millennial was founder and CEO of FTX, which at its zenith was the world’s second-largest crypto exchange. FTX filed for Chapter 11 bankruptcy protection in November 2022 after the company imploded and panicked customers withdrew billions.

Bankman-Fried had been praised in the financial media as a game-changing wunderkind. But in November of this year, he was found guilty by a jury of stealing at least $10 billion from customers of his now-bankrupt cryptocurrency exchange. Bankman-Fried is scheduled for a sentencing hearing on March 28, 2024.

From the convicted Bankman-Fried to the imprisoned Elizabeth Holmes to the late Bernie Madoff, the chutzpah of these scamsters is infuriating. But don’t get mad…get even! Below, I’ll show you how.

First, let’s look at the latest market action and what it means for your portfolio.

WATCH THIS VIDEO: Navigating The Transition from 2023 to 2024

As the year concludes, the stock market rally exhibits strong momentum. Recent weeks have witnessed both equities and bonds benefiting from favorable inflation and economic data, accompanied by a more flexible stance from the Federal Reserve.

As you can see from the following price chart of the benchmark SPDR S&P 500 ETF (SPY), the S&P 500 index hovers well above its 50- and 200-day moving averages (data as of market close December 19):

Other technical indicators are bullish as well. The New York Stock Exchange Advance/Decline line (NYAD) has been rising, a sign of increasing market breadth. This rally isn’t just about the mega-cap tech darlings.

Notably, small-cap stocks have been surging. Seasonality tends to benefit small caps toward the end of the year; lower rates and current optimism over economic growth also are generating a tailwind for the small fry.

At the same time, the CBOE Volatility Index (VIX) has been falling. The VIX sits below 13. Any level of the VIX below the threshold of 20 is considered positive and a sign of lessening stress and fear among investors; the converse is true. The low VIX right now is tantamount to waving a red flag at the stock market bull.

The main U.S. stock market indices on Tuesday continued their winning streak and closed higher as follows:

• DJIA: +0.68%
• S&P 500: +0.59%
• NASDAQ: +0.66%
• Russell 2000: +1.94%

The S&P 500 rose to within one percentage point of its all-time closing high reached in January 2022.

Great expectations…

The Fed has projected three interest rate cuts in 2024. Markets, however, have quickly surpassed the Fed’s new forecast, pricing in up to six rate cuts for next year.

Despite these expectations, I’m doubtful about whether the Fed will implement these cuts as early and as often as the market hopes. Any disappointment about Fed easing could potentially temper the market rally in the new year. Nevertheless, the prevailing expectation is that 2024 will be characterized by a more accommodative Fed policy and moderating inflation, supporting gains in both stocks and bonds throughout 2024.

Since the rally commenced in late October, the decline in interest rates and an improved economic outlook have boosted technology and cyclical stocks.

If the economy sidesteps a recession in 2024 as widely expected, cyclical firms should especially thrive. Many of these cyclical shares are trading at bargain valuations due to previously pessimistic economic projections. Because falling interest rates typically stimulate the economy, cyclical stocks perform best when the Fed pivots to a dovish stance.

After reaching about 5% in October, 10-year Treasury yields have fallen to about 3.9%, a powerfully bullish trend.

As the holiday season unfolds and the new year beckons, investors are celebrating lower inflation, the likelihood of Fed rate cuts, and gradually decelerating economic growth. Christmas has come early for Wall Street.

The Payback Trade…

It’s been a good year for stock and bond investors, but as I mentioned above, that doesn’t mean the fraudsters have taken a break.

Our colleague Jim Pearce, chief investment strategist of Mayhem Trader, has devised a system for everyday Americans to take profitable revenge against the financial crooks in our midst.

Jim’s system is a perfectly legal way for average investors to even the score. For details about how to fight back and reap big gains at the same time, click here.

John Persinos is the editorial director of Investing Daily.

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