As we approach the mid-way point of the year, we should take a moment to look back and appreciate how far the stock market has come in the first half. Year-to-date through last Friday, the S&P 500 index has gained a whopping 15.5% (including dividends), which is nearly double the return we typically expect over a full year. If the year were to end today, we would say it has been a really good one! During this advance, the market has also experienced remarkably little volatility, only suffering a roughly 5.4% correction lasting just 19 days. The rest of the time, it has been a relentless grind higher, during which the S&P 500 index has made 31 new all-time highs (ATHs), which has only happened about 11% of the time since 1950. As the chart below shows, this puts 2024 on pace to match 2017 as the year with the fifth most new all-time highs in post-war history.
Source: CWA, Bloomberg, as of 6/21/2024
Depending on your psychological make-up, such a streak of new all-time highs could either give rise to fear of missing out (a.k.a. FOMO) and a desire to chase the market higher, or be cause for skepticism and the itch to be contrarian and take some chips off the table. However, the numbers don’t lie: as we have highlighted in the past, new all-time highs are a great sign for the future path of the stock market! The table below, based on data since 1950, separates years in which the S&P 500 index made 30 or more new all-time highs by 6/30 from years in which the index made fewer than 30 new all-time highs in the first half, and shows how the market performed over the second half of the year as well as during the following year. The numbers speak for themselves: strong first halves (i.e. >= 30 ATHs by 6/30) tend to be followed by strong second halves, and also by strong returns in the following year. Moreover, they tend to be associated with shallower drawdowns in the second half of the year.
Source: CWA, Bloomberg, as of 6/21/2024
This data confirms the message from our prior research on all-time highs: they are a feature of a bull market and should be embraced, not feared.
Sauro Locatelli CFA, FRM™, SCR™
Director of Quantitative Research
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