This cumulative market indicator has been 100% accurate since 1964. This indicates a major advance within the second half of 2024.

S&P 500 (SNPIndex: ^GSPC) Because of its scope and diversity it is considered the most efficient barometer for the entire American book market. The index measures the performance of the 500 largest companies that make up 80% of U.S. equities by market capitalization.

The S&P 500 compounded 14% during the first half of 2024, surpassing the historical median level of 5%, and one book market indicator says the index is headed even higher in the coming months. Specifically, in all presidential election years involving an incumbent (a President who is running for reelection), the S&P 500 has generated a favorable return in the second half of the year every time – 100% of the time.

Here’s what traders want to know.

History says the S&P 500 could rise 11% in the second half of 2024

There have been 16 presidential elections since the S&P 500’s inception in 1957, a portion of which involved the incumbent president running for another term. As mentioned, the index has always been a winning investment in the second phase of an election year, involving an incumbent, no matter which presidential candidate wins the election.

The chart below shows the returns of the S&P 500 in the second half of each presidential election year. Re-election years (years when an incumbent ran for re-election) are marked with an asterisk.

Information supplied: YCharts. The table presents the returns of the S&P 500 over the second half of all presidential election years since the index was created in 1957. Asterisks denote re-election years, meaning an outgoing president was serving a second term.

As shown above, throughout presidential election years, the S&P 500 returned an average of 4% in the second round. On the other hand, if the results are limited to years when an incumbent president was running for reelection, as Joe Biden is in 2024, the S&P 500 returned an average of 11% in the second stretch.

This may be apocryphal, but Jeff Buchbinder at LPL Financial announced this logical explanation in a recent blog post. “We believe this pattern is partly due to boosting the pump ahead of the election with fiscal stimulus and pro-growth regulatory policies to stave off a potential recession and stimulate jobs growth.” On the other hand, he also said that since Republicans control the region, Biden has limited opportunities to top the pump.

the story continues

Nonetheless, history suggests the S&P 500 could retreat about 11% in the second half of 2024. The index, which has already risen 2% in July, is projected to rise above 9% by December.

That said, the year effect is in no way a contract for age returns. Macroeconomic fundamentals will ultimately dictate how the book market performs in the following months of 2024.

History says the S&P 500 may surge when the Fed cuts interest rates

Wall Side Road will be tracking hard-hitting market and inflation data closely in the coming months, looking for evidence the financial system is moving toward a comfortable landing, a situation in which the Fed keeps securing inflation without tipping its 2 % Returns to target. The financial system is in complete recession.

In June 2022, inflation reached a four-decade high of 9.8% due to supply chain disruptions and stimulus measures like COVID-19. The Federal Reserve responded with its most competitive rate-hike cycle since the early nineteen-eighties, and the Federal Reserve’s rate is now at a 23-year high. This is undoubtedly problematic for the book market because as borrowing costs rise, customers and companies spend less, which suppresses company revenue growth.

The good thing is that inflation fell to 3.3% in May 2024. However pricing pressures have not eased enough to warrant the long-awaited easing cycle (a period when the Federal Reserve is cutting interest rates). Therefore, investors are expecting inflation to continue moving toward its 2% target, with year-to-date alternative data issues – such as activity openings and unemployment – ​​showing a gradual, but still healthy economy.

In that case, the Fed may lower interest rates later this year, and the economy may even avoid a recession. Any such solution has traditionally been excellent information for the book market. In the seven loose cycles since 1987, the S&P 500 returned an average of 6% over the full twelve months following a decline in the primary fee scale. However, if the financial system escaped a recession, the median return during that 12-month period was 16%.

Traders need to focus on long-term profits and not on temporary activities in the book market.

Traders who can invest money in painting the book market these days realize that history is on their side. Certainly, if its efficiency aligns with the historical mean level, the S&P 500 will retreat 11% in the second half of 2024. In fact, the Refuse Book Marketplace indicator is infallible, so traders have to be alert to the dangers.

If the Fed helps keep interest rates high in other months of the year, or if the economy sinks into recession, the S&P 500 could easily head lower in the second half of 2024. For this reason, investors will have to stick to a buy-and-hold strategy that aims to achieve long-term capital gains.

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*Accumulation guide dates back to July 2, 2024

Trevor Jennewein declined to hold a position in any of the stocks discussed. The Motley Fool has declined to take a position in any of the stocks discussed. The Motley Idiot has disclosure coverage.

This cumulative market indicator has been 100% accurate since 1964. This indicates a major advance in the second half of 2024. Initially published by The Motley Idiot