Source: Zhitong Finance "Since 1950, the S&P 500 index has risen more than 10% 21 times as of the end of May. In about 90% of these cases, the S&P 500 index rose for the rest of the year. There were only two instances of declines for the rest of the year, in 1987 (-13%) and 1986 (-0.1%)." With the rebound of the stock market, the old adage "Sell in May and Go Away" seems to have been a bad advice once again. Last month, the S&P 500 index rose 4.8%, the best May performance since 2009. The NASDAQ 100 index rose nearly 6.2%, and the NASDAQ Composite Index rose 6.9%. Goldman Sachs FICC & Equities Trading Division said: "History doesn't really support this saying. Don't sell, leave the market (go on vacation), and enjoy the good times." The rising trend is still to be continued? If history is any guide, it may indicate that the rise of the stock market is not over yet. Looking ahead to the rest of 2024, Scott Rubner, Managing Director of the Goldman Sachs Global Markets Division and tactical expert, pointed out the following historical background for investors. Rubner stated that the S&P 500 index has risen 10.7% year-to-date, and since 1950, the S&P 500 index has risen more than 10% 21 times as of the end of May. In about 90% of these cases, the S&P 500 index rose for the rest of the year. There were only two instances of declines for the rest of the year, in 1987 (-13%) and 1986 (-0.1%). "Since 1950, the median return of the last 7 months of each year (June 1 to December 31) is 5.4%. In the aforementioned 21 cases, the average performance of the last 7 months increased to 8.1%." Rubner added. Rubner also pointed out that the NASDAQ index has risen for 16 consecutive Julys, with an average return of about 4.64%.
According to data from Wells Fargo Investment Institute (WFII), despite investors demanding that the Fed begin cutting interest rates, history has shown that a decline in the S&P 500 index may coincide with the start of a rate cut cycle. WFII investment strategy analyst Austin Pickle drew the ROI of the S&P 500 index and the number of days between the first rate cut by the Fed and the subsequent low point of the index in a report on Monday. He found that since 1974, the average decline of the index in the 250 days after the first rate cut was about 20%. "In other words, investors should not equate the first rate cut with a signal to lift the market's vigilance," he said.
According to the Chicago Mercantile Exchange's FedWatch Tool, traders in the fed funds futures market are pricing in a September rate cut by the Fed. But the latest dot plot released by the Fed last week showed policymakers expected to make only one 25 basis point cut to the 5.25%-5.5% federal funds rate in 2024.
Pickle said investors should focus on the reasons for the rate cut. "If the Fed adjusts its policy to adjust real interest rates to falling inflation, we believe the stock market may perform well within the tactical time frame of six to 18 months. On the other hand, if the Fed is forced to cut rates sharply in response to macroeconomic or market turmoil, we expect the stock market performance will be affected."
Pickle pointed out that during the past five rate pause periods, the ROI of the S&P 500 index was "highest" near 20%. He said the S&P 500 index rose about 14% in 2024, and adverse factors including uncertain inflation path may affect ROI in the short term. WFII's year-end 2024 target is between 5100-5300 points, lower than the S&P 500 index of around 5473 points on Monday.
However, Pickle said that WFII's target for the S&P 500 index at the end of 2025 is between 5600-5800 points, as the company believes that after a recent economic slowdown, inflation will be curbed, the U.S. economy will maintain steady growth, support corporate profit growth, and the stock market will rebound.
Edited by Jeffrey