- A record high in the S&P 500 would bode well for further gains throughout 2024, according to Ned Davis Research.
- The investment firm stated that the years in which the stock market reaches an all-time high coincide with an average gain of 15%.
- The S&P 500 is less than 2% away from hitting a new all-time high.
If he S&P 500 hits a new all-time high in 2024, a strong year of earnings is expected to follow, according to Ned Davis Research.
The investment firm did the math and found that when the S&P 500 hits at least an all-time high in a given year, the average return for the year is around 15%.
"The S&P 500 has tended to post double-digit gains in years with all-time highs," Ned Davis Research said in a note on Monday.
The data highlights two typical characteristics of the stock market: that strength begets more strength, and that stocks do not usually fall from all-time highs.
Of course, this statistic is not a failure. In the first week of January 2022, the S&P 500 jumped to an all-time high and subsequently fell about 20% that year. But if we go back to 1944, the market has a strong tendency to continue rising when new all-time highs are reached.
The S&P 500 is less than 2% away from hitting a new all-time high, so 2024 could be another year of double-digit returns if the index hits a new record.
And the gains could be even bigger if the S&P 500 hits all-time highs numerous times this year. More than seven all-time highs in a year have resulted in an average gain of 19% for that year, and more than 35 records in a year have generated an average gain of 25%.
These records are not uncommon. In 2021, the S&P 500 recorded 70 closing highs, and in 2017 the index recorded more than 60 historical closing highs. Both years saw incredibly strong returns for the S&P 500, with the index gaining 27% in 2021 and 19% in 2017.
And if a record is hit this year, the strong gains could extend into 2025. Ned Davis Research found that the average gain in the following year after hitting a record was about 8%.
To simplify it, the bottom line is this: stocks hitting all-time highs is bullish, not bearish.
Ned Davis Research
