S&P 500 Down 6% on Overdue Pullback

After delivering historic gains in the last five months, the S&P 500 was due for a pullback. Three weeks into April and the leading index is down 6% from the 52-week high. Tech stocks lagged the broader market, with the NASDAQ 100 falling 8% from the 52-week high.

Below is the S&P 500 and NASDAQ 100 chart – year to date.

The recent decline has been driven by two key factors.

Military conflict in the middle east: military conflict in the middle east recently escalated between Israel and Iran.

Tehran plays down reported Israeli attacks, signals no retaliation

S&P 500 was overbought: The S&P 500 delivered a historic string of gains in the last five months, climbing more than 25% from November through March. This is one of the best rallies ever, but after stocks were looking overbought. After a big string of gains, its normal for investors to take some profit and stocks to see a pullback.

Despite the pullback – the S&P 500 is still up 20% in the last 12 months and the NASDAQ 100 is up 30%. Take a look below.

What Should We Expect Moving Forward?

Despite this recent pullback, I remain optimistic on stocks for the year. In fact, I see a high probability of more gains. Here’s why.

  • The S&P 500’s strong gain in 2023 signals a high probability of more gains in 2024.
  • The S&P 500’s strong gain in the first quarter signals a high probability of more gains this year.
  • The S&P 500 has a strong history of gains in presidential re election years.

And finally, I found this cool study on X. It says that during presidential election years the S&P 500 tends to be strong in Q1 and see weakness in April and May before accelerating the rest of the year. Take a look below.

I’m Looking to Deploy Cash on Weakness

In the short run we will probably see some more volatility. But i think this pullback is close to being over. In the next few weeks I am expecting the S&P 500 to stabilize and begin trending higher again. That’s why I have been using weakness as an opportunity to deploy more capital into stocks.

It’s always challenging to buy the exact low of a pullback – but history clearly shows that buying stocks on weakness is a highly effective strategy for boosting returns. That’s how I am handling this weakness.

I’ll be back with another update next week – have a great day!

Disclaimer: This report is for entertainment purposes only and is not investment advice. 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.


Michael Vodicka

Michael Vodicka is the president and founder of the Vodicka Group Inc., a licensed investment advisor (Series 65) and a financial journalist.