- Stock markets soar in the first half of 2024, led by tech gains, but nearly 40% of S&P 500 companies lag.
- Will the rally continue? We will assess historical trends and investor sentiment to try and find out.
- Despite positive signs, caution is urged as pullbacks are a normal part of the market cycle.
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The first half of 2024 has been amazing for stocks so far, with the S&P 500 and Nasdaq soaring to new heights despite a number of S&P 500 stocks facing declines. The tech sector, buoyed by advancements in artificial intelligence, has led the charge, but challenges remain as we navigate through the year's second half.
As of mid-2024, the S&P 500 has surged nearly 15% year-to-date, with the Nasdaq Composite and Nasdaq 100 climbing 18% and 17%, respectively. This robust performance is largely driven by gains in the technology sector powered by the AI boom.
However, not all sectors have thrived. Approximately 38% of the S&P 500 stocks posted negative returns in the first half of the year. A notable example is Walgreens Boots Alliance Inc (NASDAQ:WBA), whose shares plummeted following disappointing quarterly results.
As we reach the halfway point of the year, let's take a look at the best and the worst performers for H1 2024.
Best Performing Sectors:
Top Stocks:
- Super Micro Computer (NASDAQ:SMCI) 187%
- Nvidia (NASDAQ:NVDA) 150%
- Vistra Energy Corp (NYSE:VST) 123%
Worst Stocks:
- Walgreens Boots Alliance -52.1%
- Lululemon Athletica (NASDAQ:LULU) -39.7% Lululemon Athletica -39.7% Intel (NASDAQ: NASDAQ: )
- Intel (NASDAQ:INTC) -38.7%
Two main catalysts are driving the market to its current highs: the expectation of Fed interest rate cuts this year and corporate earnings consistently beating market expectations. Although the Fed has forecasted only one cut, fed funds futures traders are anticipating two cuts starting in September.
So, will markets continue to head higher? I believe so, and based on these 4 historical trends and patterns markets could continue to rally as H2 2024 beckons:
1. July Historical Trends
The S&P 500 has risen in July for the past nine consecutive years, though this is not a record; it rose 11 years in a row from 1949 to 1959. In 2024, both the S&P 500 and the Nasdaq have been hitting all-time highs, specifically 31 and 20 times, respectively.
While the current market strength is notable, it's important to remember that pullbacks are a normal part of market behavior. Since 1958, the S&P 500 has experienced 51 pullbacks of -10% or more. On average, it's difficult to go more than a full year without a correction of some intensity.
2. 9-Day Seasonal Pattern in June-July
We are entering an interesting 9-day seasonal pattern for the market. Historically, during the last three business days of June and the first nine business days of July, the Nasdaq tends to rally. This 12-day streak has seen the index rise in 30 of the last 39 years, with an average increase of 2.5%. This year, the Nasdaq's pattern began on June 26 and extends through July 12.
3. Technical Analysis: Golden Crossovers
In the last eight months, we have witnessed two golden crossovers—a bullish technical pattern where a short-term moving average crosses above a long-term moving average.
After the golden crossover that occurred on November 8, the Nasdaq index rose from 13,660 to a high of 16,538. A crossover was triggered on May 3 this year, with the index rising from 16,147 to a high of 18,035.
4. Election Year Impact
Historically, the S&P 500 has risen in almost every election year since 1960, except for 2000 (dotcom crash) and 2008 (global financial crisis). In the three most recent election years (2012, 2016, 2020), the S&P 500 rose by at least 10%.
Notably, in the last seven months of an election year, the S&P 500 has risen in 16 out of 18 occasions over the past 70 years. Amid the election year, the investor sentiment remains bullish as well, as noted by the AAII.
Bullish sentiment, i.e. expectations that stock prices will rise over the next six months, rose 0.1 percentage points to 44.5% and remains above its historical average of 37.5%.
Bearish sentiment, i.e., expectations that stock prices will fall in the next six months, is at 28.3% and below its historical average of 31%.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.