As Thanksgiving approaches, investors have plenty to be thankful for considering the recent market activity. If history serves as an indicator, the remainder of the year and the beginning of 2024 should continue to be prosperous.
Positive Momentum in the Markets
All three major indexes are experiencing an upward trend on Monday, following an exceptional run in recent weeks. On Friday, the Nasdaq Composite achieved its highest three-week point gain ever recorded. While Silicon Valley has been a driving force behind the 2023 rally, it’s important to note that it’s not solely the tech-heavy index benefiting from these gains.
The S&P 500, along with the Nasdaq and the Dow Jones Industrial Average, has seen three consecutive weeks of growth, with a 9.6% increase over this period. These are the largest three-week point and percentage gains since April and June 2020 respectively, when the market was rebounding from the initial impact of the Covid-19 pandemic.
The S&P 500 has seen significant gains this month, rising by 7.6% in November alone and more than 17% since the beginning of the year.
Cautious Optimism Amid Potential Challenges
While the market has performed exceptionally well thus far, some skeptics may question its ability to continue its ascent, especially given the impact of high interest rates on tech companies. However, historical data from Dow Jones Market Data suggests that the S&P 500 has often managed to sustain positive momentum, despite these challenges.
With Thanksgiving just around the corner, investors can be grateful for the recent market moves. As we look ahead to the rest of the year and into 2024, there is reason to be merry and bright about the prospects for continued growth.
The Historical Performance of the S&P 500: A Promising Outlook
Since its inception in 1962, the S&P 500 has witnessed several instances of significant three-week percentage changes, reaching or exceeding 9%. Remarkably, after these rapid surges, the index has consistently demonstrated positive returns over varying timeframes.
On average, one month following these surges, the index has experienced a gain of 1.83%, with a further increase to 3.91% after two months. These figures suggest that as time progresses, the gains tend to compound.
Notably, these positive outcomes are not mere outliers. When considering the median basis, the S&P 500 has consistently remained in the black over one, two, three, four, and eight-week periods. Four weeks after the surge, the median gain is 2.21%, increasing to an impressive 3.3% after eight weeks.
A Promising Outlook
Given these historical patterns, there is reason to anticipate a fruitful end to the year and an encouraging start to 2024 for the S&P 500.
However, it is important to acknowledge that recent years have shown some deviations from this reliable pattern. In particular, during the twice in April 2020 and once in June of that year when the S&P 500 experienced three-week jumps exceeding 9%, the results were mixed. While the index was in the red one week and one month later for the first and last of these instances, it did show higher gains eight weeks down the line.
Naturally, investors must remember that past performance does not guarantee future results. Other factors can influence the market in unexpected ways. Despite this caveat, it’s worth noting that in a year where bullish historical trends often materialized, there are indications that the party may continue.