The S&P 500 (SPY) logged its fifth winning month in a row, gaining 5% in February on solid Q4 earnings and expectations for lower interest rates.
The monthly gain built on a good start to the year for US stocks. The S&P 500 is already up 8.5% two months into the year. The tech heavy NASDAQ 100 (QQQ) is up 10% on the year.
Stocks have been on a roll since November. The S&P 500 is up five months in a row. Its 25% gain in that time is one of the largest ever. After the big surge, both the S&P 500 and NASDAQ 100 hit a new all-time high this week. Take a look below at the 5-year chart of the S&P 500. You can see how the recent move higher compares to other time periods.
The recent gains have many investors asking an important question: what should we expect moving forward?
Short-Term Outlook – Cautious: After the recent move higher the S&P 500 looks a little overbought in the short run. I’m not expecting any major weakness. But when stocks are extended in the short run its not uncommon to see a 2%-3% pullback.
Long-Term Outlook – Bullish: I was optimistic on stocks going into 2024. I estimated that the S&P 500 would gain around 10% on the year. However, the exceptional strength we have seen early in the year is an important indicator that the annual gain could potentially be higher – more like 15% to 20% in 2024.
Here is a great study from Carson Research – it shows that when the S&P 500 gains 5% or more in February, the calendar year is up a medium of 20%. The 12 months after a strong February, the S&P 500 is up an average of 13%. Take a look at the chart below.
Summary: I wouldn’t be shocked to see some short-term weakness but I remain bullish on stocks for the year and expect the S&P 500 to gain between 15% and 20% in 2024.
I am Looking to Deploy Cash on Any Weakness: In light of this forecast on the S&P 500 I am looking to deploy cash on any weakness in stocks.
I’ll be back with another update next week – have a great day!
Disclaimer: This report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading.
