We're off to a great start. And when I say "we" I'm talking about investors. The stock market is booming so far this year.
The S&P 500 finished higher in the first quarter than in the same period last year. Will the index continue soaring in 2024 after a 10% gain in Q1? Here's what history shows.
Image source: Getty Images.
Historically speaking
Let's look back at how the S&P has performed in the first quarter compared to the full year. The following table shows data from 1983 through 2023:
| Year | Q1 Change | Full Year Change |
|---|---|---|
| 1983 | 8.76% | 17.27% |
| 1984 | (3.49%) | 1.40% |
| 1985 | 8.02% | 26.33% |
| 1986 | 13.07% | 14.62% |
| 1987 | 20.45% | 2.03% |
| 1988 | 4.78% | 12.40% |
| 1989 | 6.18% | 25.25% |
| 1990 | (3.81%) | (6.56%) |
| 1991 | 13.63% | 26.31% |
| 1992 | (3.21%) | 4.46% |
| 1993 | 3.66% | 7.06% |
| 1994 | (4.43%) | (1.54%) |
| 1995 | 9.02% | 34.11% |
| 1996 | 4.80% | 20.26% |
| 1997 | 2.21% | 31.01% |
| 1998 | 13.53% | 26.67% |
| 1999 | 4.65% | 19.53% |
| 2000 | 2.00% | (10.14%) |
| 2001 | (12.11%) | (13.04%) |
| 2002 | (0.06%) | (23.37%) |
| 2003 | (3.60%) | 26.38% |
| 2004 | 1.29% | 8.99% |
| 2005 | (2.58%) | 3.00% |
| 2006 | 3.73% | 13.62% |
| 2007 | 0.18% | 3.53% |
| 2008 | (9.92%) | (38.49%) |
| 2009 | (11.67%) | 23.45% |
| 2010 | 4.87% | 12.78% |
| 2011 | 5.42% | 0.00% |
| 2012 | 12.00% | 13.41% |
| 2013 | 10.03% | 29.60% |
| 2014 | 1.30% | 11.39% |
| 2015 | 0.44% | (0.73%) |
| 2016 | 0.77% | 9.54% |
| 2017 | 5.53% | 19.42% |
| 2018 | (1.22%) | (6.24%) |
| 2019 | 13.07% | 28.88% |
| 2020 | (20.00%) | 16.26% |
| 2021 | 5.77% | 26.89% |
| 2022 | (4.95%) | (19.44%) |
| 2023 | 7.03% | 24.23% |
Data source: YCharts.
Since 1983, there have been only seven instances where the S&P 500 ended Q1 with a gain of ten percent or more. Each time, the index finished the year in positive territory. However, the S&P lost ground in the remaining three quarters of 1987. In two other years (1986 and 2012) it rose less than 2% after the first quarter. Still, the S&P soared much higher by year-end in four of the seven years when it had a double-digit gain in Q1.
What about the track record when the S&P 500 delivered any positive gain in Q1? This happened 28 times since 1983 (excluding this year). The index finished higher in 23 of those years. In 17 cases, the S&P delivered stronger gains in the last three quarters than in the first quarter.
Let the good times roll
If history is a guide, the chances that the S&P 500 will perform well during the rest of 2024 look pretty good. There are other reasons to expect stocks to continue their winning ways too.
The U.S. economy appears to be relatively strong. Real GDP growth in the fourth quarter of 2023 was 3.4%. There are no signs that the economy is slowing so far this year.
Unemployment rates remain low. In February, the rate was 3.9%. Many economists view an unemployment rate between 4% and 5% as full employment.
Although the consumer price index (CPI) rose slightly in February to 3.2%, inflation has moderated significantly compared to 2022 and 2023. The Federal Reserve still projects three interest rate cuts later this year. These cuts would likely provide positive catalysts for the stock market.
We also have a presidential election in the U.S. In 20 of the last 24 presidential election years, the S&P 500 rose.
Potential flies in the ointment
Can investors count on the S&P 500 continuing to soar in 2024 after delivering a 10% gain in Q1? Unfortunately, the answer is "no." There could be some potential flies in the ointment.
Resurging inflation is a real possibility. If the Fed decided against cutting interest rates (or worse, raised rates again), stocks would probably suffer.
A major geopolitical crisis could also derail the current market momentum. We don't have to limit the potential culprits to the current turmoil in Gaza or Ukraine; any number of hot spots across the globe could boil over.
We can't rule out "black swan" events either. A major natural disaster or massive cyberattack could cause stocks to sink.
The bottom line is that no one knows what the future holds. But based on history, starting on a decidedly positive note bodes well for the S&P 500 for the rest of this year.
