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Dear Clients,

Markets took a breather yesterday, with the S&P 500 falling -0.72% after a stronger-than-expected ISM PMI Prices Paid reading reignited inflationary fears.

Are these fears warranted?

Also, the S&P 500 started the year strong, returning 10.2% in Q1 2024. That’s 40% annualized. Does history suggest a continuation of the rally?

Let’s dive in 👇🏻

— The We Study Markets team

The S&P 500 Rose 10% in Q1

We have been noting to Clients that 2024 should continue to be a strong year for stocks.

Here’s a brief summary of our thesis:

• Inflation on a YoY basis is falling, and markets tend to perform better when inflation is decelerating vs. accelerating
  

• Strategists, on average, came into 2024 quite bearish on stocks (typically a contrarian indicator)
  

• Earnings expectations are hitting new all-time highs
  

• A strong start to the year tends to signal continued gains

Today, we add another data point to the list of reasons that 2024 may be strong.

The S&P 500 is +10% in Q1 2024.

• This has happened in only 11 other years since 1950
  

• On average, the rest of the year (end of Q1 through year-end) tends to finish strong
  

• Average rest of year return: +6.5%
  

• Median: 8.0%
  

• 10 of 11 Years saw further gains
  

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