Stock Market Indicator Predicts Major Move in Late 2024

Last updated: July 1, 2024

photo_of_person_holding_smartphoneThe S&P 500 surged 14.5% in the first half of 2024, initially driven by hopes for rate cuts.

Investors expected six cuts from the Federal Reserve, but persistent inflation shifted expectations to just two cuts later this year, per CME Group’s FedWatch Tool.

Artificial intelligence (AI) excitement provided a second boost. Investors overlooked macroeconomic worries, pouring money into AI stocks.

Nvidia alone contributed about 30% of the S&P 500’s gains this year, with Microsoft, Alphabet, and Amazon adding another 26%.

What’s next for the S&P 500? History suggests continued growth. When the S&P 500 has seen double-digit gains in the first half of the year, it has risen in the second half 86% of the time since 1984. Let’s break it down.

Since 1984, the S&P 500 has posted first-half returns of at least 10% on 14 occasions. In 12 of those instances, it continued climbing in the second half. The median second-half return was 10%.

Year S&P 500 First-Half Return S&P 500 Second-Half Return
1985 15% 10%
1986 19% -3%
1987 26% -19%
1988 11% 2%
1989 15% 11%
1991 12% 12%
1995 19% 13%
1997 19% 10%
1998 17% 8%
1999 12% 7%
2013 13% 15%
2019 17% 10%
2021 14% 11%
2023 16% 7%
Median N/A 10%

Data source: YCharts.

Wall Street will focus on inflation and interest rates. The Fed expects inflation to drop to 2.5% this year. If it cools faster, we might see quicker rate cuts, stimulating the economy and boosting business earnings.

Conversely, if inflation stays high, the Fed might keep rates elevated. High borrowing costs could dampen consumer and business spending, potentially dragging the economy into recession.

Even without a downturn, high rates could hurt financial results, pushing the S&P 500 lower.

Valuations are another concern. The S&P 500 trades at 26 times earnings, above the five-year average of 23.3 and the 10-year average of 21.4. This premium means stocks are pricey, and bad news could hit hard.

Other factors—like the presidential election, geopolitical tensions, AI breakthroughs, or unexpected events—could also sway the market.

Here’s the key takeaway: The stock market has performed well over the long haul. Despite 14 market corrections and five bear markets in the past three decades, the S&P 500 returned 2,060%, or 10.7% annually.

Patient investors who buy and hold good stocks (or an S&P 500 index fund) are likely to be rewarded over time, regardless of 2024’s second-half performance.

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About The Author

Co-Founder & Chief Editor
Jon Morgan, MBA, LLM, has over ten years of experience growing startups and currently serves as CEO and Editor-in-Chief of Venture Smarter. Educated at UC Davis and Harvard, he offers deeply informed guidance. Beyond work, he enjoys spending time with family, his poodle Sophie, and learning Spanish.
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Growth & Transition Advisor
LJ Viveros has 40 years of experience in founding and scaling businesses, including a significant sale to Logitech. He has led Market Solutions LLC since 1999, focusing on strategic transitions for global brands. A graduate of Saint Mary’s College in Communications, LJ is also a distinguished Matsushita Executive alumnus.
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