The S&P 500 is already up 15% in 2024, but historically the index could rise another 10% by the end of the year.
of S&P 500 (^GSPC 0.25%) The stock has surged in 2024, posting the second-highest first-quarter return in the past decade. It has also risen more than 10% in its first 100 trading days, which is only three times in the past 25 years and only 18 times since the stock was founded in 1957.
When we look at the 18 years in which the S&P 500 rose at least 10% in its first 100 trading days, a relatively accurate stock market indicator emerges: Specifically, after these strong starts, the index rose further in the remaining months of the year 15 out of 18 times, making the indicator 83% accurate.
Here’s what investors need to know.
History predicts the stock market will rise about 10% in 2024
The S&P 500 represents approximately 80% of US equities by market capitalization and is comprised of value and growth stocks across all market sectors. These characteristics make the S&P 500 a leading benchmark for the overall US equity market.
The chart below lists the years in which the S&P 500 delivered at least a 10% return in the first 100 trading days. It also shows how the index performed for the remainder of each year.
|
Year |
S&P 500 (100-day returns) |
S&P 500 (annual return) |
|---|---|---|
|
1961 |
14% |
twenty three% |
|
1963 |
11% |
19% |
|
1967 |
12% |
20% |
|
1975 |
32% |
32% |
|
1976 |
Ten% |
19% |
|
1983 |
18% |
17% |
|
1985 |
12% |
26% |
|
1986 |
14% |
15% |
|
1987 |
19% |
2% |
|
1989 |
15% |
27% |
|
1991 |
14% |
26% |
|
1995 |
15% |
34% |
|
1996 |
Ten% |
20% |
|
1997 |
14% |
31% |
|
1998 |
13% |
27% |
|
2013 |
16% |
30% |
|
2019 |
13% |
29% |
|
2021 |
12% |
27% |
|
average |
N/A |
twenty four% |
|
Median |
N/A |
26% |
Data source: JPMorgan Chase.
As the chart shows, when the S&P 500 has risen at least 10% in the first 100 trading days of the year, the index has returned an average of 24% per year, with a median of 26%. While past performance is no guarantee of future returns, you can use that information to make inferences about the coming months.
Specifically, the S&P 500 is up 15% so far this year, meaning an average gain of 9% and a median gain of 11% is expected. In other words, historically, the S&P 500 is expected to return about 10% for the remainder of 2024.
Stock market performance depends on inflation and interest rates
Inflation and interest rates will play a large role in how the S&P 500 performs for the rest of the year. Specifically, if inflation eases and the Federal Reserve cuts benchmark interest rates, lower borrowing costs could drive economic expansion and stronger corporate earnings, which could boost stock prices.
On the other hand, if inflation remains high and the Federal Reserve keeps interest rates at current levels (the highest in the past 20 years), higher borrowing costs could slow the economic expansion and corporate earnings growth, and stock prices could fall.
At this point, it is difficult to predict where the economy will go. The U.S. economy expanded at a 1.3% annual rate in the first quarter, well below market expectations of 2.5%. Weak economic growth could lead to earlier interest rate cuts. However, the U.S. economy added 272,000 jobs in May, well above market expectations of 185,000. Also, inflation was 3.4% in May, well above the Federal Reserve’s 2% target. Strong hiring and persistently high inflation could delay interest rate cuts.
Wall Street analysts have a range of predictions for the stock market.
The median price targets for each stock in the S&P 500 can be aggregated into a bottom-up target for the entire index. The term “bottom-up” means that the target was constructed by analyzing the individual components of the S&P 500, rather than broad economic factors. The current bottom-up price target for the S&P 500 is 5,925, which represents an 8% upside from the current level of 5,485.
However, analysts have very different opinions about the stock market. For example: Evercore He recently raised his year-end target for the S&P 500 to 6,000, which would mean a rise of more than 9%. J.P. Morgan It has set a year-end target of 4,200 for the S&P 500, which would imply a 23% decline.
The bottom line is this: History suggests the S&P 500 could rise about 10% by the end of the year, and bottom-up targets more or less support that conclusion. But investors shouldn’t be lulled into a false sense of security. Economic signs are mixed, and at least one Wall Street analyst expects the S&P 500 to fall sharply in the remaining months of the year.
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool owns shares in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.
