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History Suggests S&P 500 Rallies an Additional
9-10% by Year-End

Stocks have defied bearish calls this year, with the S&P 500 rallying +8.3% in 2024 as of the Friday, March 1 close.

This is the 12th-best S&P 500 year-to-date performance since 1950. And this comes after a +24% gain last year.

While many think we have front-loaded equity gains, the data suggests we might just be getting started.

Consider the following: We looked at the 11 instances since 1950 in which the S&P 500 is up >7.7% through March 1st.

• We then looked at returns for the rest of the year (i.e., 3/1 through 12/31). The results are below:

Average gain March 1st through year-end: +8.7%

• Implies S&P 500 to reach approximately 5,580 by year-end

Median gain March 1st through year-end: +10.5%

• Implies S&P 500 to reach approximately 5,670 by year-end
  

• Win Ratio: 91%

And for the full year?

• Average: 20.9%
  

• Median: 23.1%
  

• Win Ratio: 100%

The win ratio is 100% for the full year. Think about that: The S&P 500 has never ended lower on the full year when returns through March 1 are 7.7% or greater.

Cash On the Sidelines Supports Bull Thesis

ICI (Investment Company Institute) tracks the amount of assets in money market funds. This is a good proxy for “cash on the sidelines,” where money sits idle and earns short-term market interest rates.

When bear markets inflect higher and turn into bull markets, it makes sense for “cash on the sidelines” to flow into stocks. We saw this after the 2008-09 Global Financial Crisis and the 2020 COVID-19 stock market lows.

• But there’s been an interesting divergence since the October 2022 low:

The top chart is the S&P 500; the bottom chart is total money market assets (i.e., cash on the sidelines). The black dashed lines show the beginning of new bull markets.

Notice how cash tends to flee money markets (presumably into stocks) when the S&P 500 bottomed in 2009 and 2020?

Now, take a look at the 2022 bear market low. Since the recent bear market low, cash has surged into money markets while stocks have rallied.

As the chart below highlights, investors have continued to raise cash throughout 2024 despite stocks posting +7.7% gains YTD.

So much for investors being “all bulled up.” It means there’s still room to rally.

The Bottom Line

The S&P 500 continues to surge despite consensus proclaiming that the market is due for a significant correction. That’s nothing new. Consider that 100% of economists forecasted a recession in the U.S. on October 17, 2022.

• The stock market has rallied +40% since
  

• We have seen no recession
  

• So much for “expert opinions” guiding your investment decisions
  

• We use data instead — it tends to work better

Applying this principle to today, this market looks to have more room to run. Pullbacks are part of every bull market, but dips could give investors entry points into a market that (based on history) is set to move higher through year-end.

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