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Stocks Are Having Their Best Election Year Since 1976: Can the Second-Half Rally Continue?
U.S. stocks have posted an impressive election-year rally so far in 2024. The $S&P 500 Index (.SPX.US)$ is on pace for its best first-half performance during an election year since 1976, as well as the second-best performance in an election year in its history, according to Dow Jones Market Data.
But investors question whether that rally will continue in the second half of this year. Bank of America cautioned investors against following the Wall Street adage "sell in May and go away," as statistical data shows that presidential election years can see big summer rallies.
"The S&P 500 tends to have a summer rally, and Presidential election years can see big summer rallies," said the bank.
Their analysis shows that June to August is the second strongest three-month period of the year for all years going back to 1928, with the S&P 500 up 65% of the time on an average return of 3.2%.
Meanwhile, in presidential election years, the S&P 500 is up 75% of the time from June to August on an average return of 7.3%.
Bank of America also pointed to a slate of bullish technical patterns, such as a growing number of stocks hitting 52-week highs.
However, analysts at Ned Davis Research warn that the rally in the first half of this year has“left valuations stretched, sentiment optimistic, and the market overbought.”
A number of factors leave the U.S. stock market vulnerable to a correction in the second half of the year, the analysts noted — including corporate-earnings estimates, uncertainty around potential Fed rate cuts and November’s presidential election, and the limited breadth of the market’s rally.
While earnings estimates have been improving since the start of the year — with analysts now expecting earnings growth of 12% to 13% for 2024 — valuations are rising even faster, said Sam Stovall, chief investment strategist at CFRA.
Moreover, JPMorgan’s chief market strategist Marko Kolanovic also says the S&P 500 will falter in coming months in the face of mounting headwinds, from a slowing U.S. economy to downward earnings revisions.
The U.S. equity gauge is poised to plunge to 4,200 by year-end, a roughly 23 per cent drop from Friday’s close around 5,460, Kolanovic and his team said last Friday in a mid-year outlook.
Mooers, how do you think the US stock will perform in the second half of the election year?
Source: Yahoo Finance, Investing, MarketWatch
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Donald Perkins : I would say the market is definitely not following the real economy. There will definitely be a big correction.
These companies may look good, but you have to have consumers and consumers are out of money.
I guess everyone believes the companies can do it by themselves.
Chris Medina : Wow
Meme_Short_Queen : 4200