This cumulative market indicator has been accurate 86% of the time since 1984, and it warns of a massive decline in the second half of 2024

S&P 500 (^GSPC -0.41%, An increase of 14.5% in the first half of 2024. The momentum was initially driven by rate-cut expectations. Traders entered the year thinking the Fed would cut its benchmark interest rate as low as six times. However sticky inflation resets people’s expectations. According to this, the market now expects only two cuts after this year CME Crew‘s Fadewatch device.

Thankfully, curiosity about synthetic intelligence (AI) provided a second tailwind for the S&P 500. Traders set aside thoughts about the macroeconomic situation and invested in AI stocks. For example, NVIDIA Unloved has contributed nearly 30% of the S&P 500’s gains over the past year. Microsoft, AlphabetAnd Amazon have combined to promote approximately 26% of the beneficial properties.

The S&P 500’s performance in the second half of 2024 depends on how those variables continue to conform, although a reserve market indicator suggests the index will maintain its upward momentum. Notably, after double-digit returns in the first half of the year, the S&P 500 has almost always climbed even higher in the second half. This is what traders need to know.

History says the S&P 500 will jump in the second half of 2024

Going back to 1984, the S&P 500 has returned at least 10% in the first half of the year on 14 occasions. The index continued to rise in the second half of the year on 12 of those 14 occasions, or 86% of the occasions. The chart below provides additional components.

Information supplied: YCharts.

As shown above, when the S&P 500 has improved a minimum of 10% in the first half of a given year, the index has returned an average of 10% in the second half of the year.

Date efficiency is not a trade-off of date effects, although history shows double-digit growth in the S&P 500 during the additional months through 2024. This is important because the S&P 500 is considered the most efficient benchmark for the entire US. Protect the market. Traders can take advantage of that potential gain by buying specific individual stocks, particularly those that fall into the category of AI enablers or S&P 500 index treasuries.

What traders need to keep in mind in the second half of 2024

Wall Boulevard will continue to make decisions on inflation and interest rates in the second half of the year, so investors will need to keep an eye on each metric. The Fed expects inflation to ease to 2.5% this year, as measured by the non-public consumption expenditure (PCE) price index, although if inflation eases more rapidly than policymakers expect. First we can reduce interest rates. This could theoretically stimulate the economy and boost corporate revenues, potentially sending the S&P 500 higher.

However, if inflation remains elevated the Fed will not reduce interest rates by any means this year. In that case, higher borrowing rates will continue to weigh on consumer and business spending, creating headwinds to economic growth that could translate directly into a recession. Although the financial system avoids a recession, increasing interest rates could have a worse-than-expected financial impact on the reserve market, which would undoubtedly lead to a decline in the S&P 500.

Furthermore, traders have to take into account the uncertain situation in terms of valuations. The S&P 500 recently traded at 26 times earnings, which is way below the five-year average of 23.3x earnings and the 10-year average of 21.4x earnings. This means that many stocks are expensive by ancient standards, such that any relevant bad information can have a particularly pronounced impact on the reserve marketplace.

After all, those aren’t the variables that could impact the S&P 500 in the second half. They’re just the furthest down. In the long run, anything that affects company earnings or investor sentiment – ​​whether it’s a presidential election, geopolitical upheaval, a breakthrough in AI, or any number of impossible-to-predict events – is protected. Can affect the market for better or worse. Within additional months of 12 months.

With that in mind, here is the best idea I found to trade: The reserve marketplace has performed consistently well over a long period of time. The financial meltdown dragged the S&P 500 through a maximum of 14 market corrections and 5 bear markets in 3 decades, although the index returned 2,060% during that period, equivalent to an annualized 10.7%. Therefore, impact investors who buy and hold good stocks (or S&P 500 index treasuries) at reasonable prices will certainly be richly rewarded in an instant, no matter how the reserve market fares in the second half of 2024. Do you play?

Susan Frey, an Alphabet executive, is a member of The Motley Fool’s board of administrators. John Mackey, former CEO of Entire Meals Marketplace, a subsidiary of Amazon, is a member of The Motley Idiot’s board of administrators. Trevor Jennewein has positions at Amazon and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Nvidia. The Motley Idiot recommends CME Crew and recommends referencing options: long January 2026 $395 scream on Microsoft and long January 2026 $405 scream on Microsoft. The Motley Idiot has disclosure coverage.