Year-to-date through June 20, the S&P 500 gained nearly 15%. Along the way, the market recorded the 11th greatest first quarter (Q1) return since 1945 and posted 22 new all-time highs. During the second quarter (Q2) to date, the market recorded an above-average Q2 return of 4.2% and added nine more new highs. There is both good and bad news about the outlook for the rest of the year, notes Sam Stovall, chief investment strategist at CFRA Research.

Since WWII, the 10 years that enjoyed the highest number of new highs through mid-year went on to post full-year gains 100% of the time, rising an average of 21.5%. That was the good news.

Now for the bad news. Even though history implies (but does not guarantee) that the S&P 500 should advance in price during the second half (H2) of 2024, it also warns that volatility will likely pick up, much like the price surge in Q1. This, combined with the H1 count of new highs, increases the probability of a second decline in excess of 5%, which may also be deeper than the first.


Possible triggers include the Fed’s continued hawkish monetary stance, a subsequent acceleration in the decline in economic growth projections, and elevated valuations. The S&P 500 currently trades at a 33% premium to its 20-year average P/E on forward 12-month earnings estimates, while the S&P 500 tech sector sports a hefty 71% premium – the highest since 2000.

Should H2 of this year act similarly to the prior 10 since 1990 with the top count of H1 all-time highs, the S&P 500 should post an above-average return, accompanied by gains for all sizes, styles, and sectors, led by communication services, health care, and technology. Finally, 78% of the 62 subindustries that participated in all 10 observations could post an additional rise in price.

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