Since the beginning of 2024, the S&P 500 and the Nasdaq Composite have repeatedly hit new highs, but there may be hidden twists and turns in the second half of this year.

According to FactSet data, the biggest turbulence that investors have encountered since the recent wave of bulls began happened in April, with the S&P 500 falling 5.5% from the closing on March 28th to the closing on April 19th.

However, history has shown that a bigger correction may be on the horizon. Dow Jones data shows that since the beginning of 1958, the S&P 500 has experienced 51 corrections of 10% or more. On average, stocks rarely go without a correction of at least 10% for more than a year, defined as falling 10% or more from the recent high.

Wall Street strategists responsible for predicting the direction of the US stock market in the coming months are aware of this. Even some strategists who have recently raised their year-end targets for the S&P 500 are warning that the market may face bigger volatility before 2025.

When Brian Belski, chief investment strategist at BMO, announced his revised year-end target last month in a report, he included a chart showing that the S&P 500 averages a 9.4% decline at some point in the second year of a bull market. He said he doubted that 2024 would be an exception.

Largest Decline in the S&P 500 in the Second Year of a Bull Market

"We still question whether the pullback in March and April, which amounted to a 5.5% decline in the S&P 500, was the worst the market will experience this year," Belski said in the report.

But anxious investors can take comfort in the fact that any correction in their portfolios, even if this pattern repeats, may be short-lived. As Belski pointed out, after a correction in the second year of a bull market, there is typically a quick rebound, and the S&P 500 averages a 14.5% gain.

Many on Wall Street fear that US stocks could stumble, and understandably so. The S&P 500 and the Nasdaq Composite have been relentlessly pushing higher for almost eight months now, with both indices setting 31 and 20 new closing highs, respectively, according to Dow Jones Market Data.

And it's not just US stocks that are rebounding in 2024. From commodities to cryptos to the dollar, markets are generally trending higher this year, and even US Treasuries are on track to recoup their losses from earlier this year.

But beneath the surface calm, individual stocks can be exceedingly volatile at times, and that volatility is becoming more frequent. A recent report from one trading desk at Goldman Sachs showed that average stock volatility in the S&P 500 in recent weeks is 4.5 times higher than the index's volatility. Nvidia's stock has had significant swings in the past week, wiping out about $500 billion in market cap in just a few days.

Dow Jones data shows that US stocks are headed for their best first half of an election year since 1976. Ryan Detrick, chief market strategist at Carson Group, said the continued rise of the market in 2024 is a stark contrast to typical election-year performance.

If April's decline ultimately proves to be the worst investors will see, it could be the smallest dip for the S&P 500 during a US presidential election year since 1976.

According to Detrick's data analysis, double-digit declines have plenty of precedent. Since 1950, the S&P 500 has averaged a 13% drop from peak to trough during election years. By comparison, the S&P is up 14.7% and the Nasdaq Composite is up more than 18% year-to-date, according to FactSet.

The "fear index" for US stocks has also been sending out all-clear signals, which could indicate that investors are growing complacent, making the market more fragile. The CBOE Volatility Index (VIX), which gauges implied volatility through S&P 500 options trading activity, has been staying low after hitting nearly a five-year low last month.

Of course, past performance is no guarantee of future results, and short-term periods of turbulence may not matter much to disciplined long-term investors.