The S&P 500 has delivered a stunning performance in 2024, with a jaw-dropping 50 record closes and counting. There are still weeks left in the year, and this has already tripled the annual average of all-time highs. Investors might recall a similar euphoria in 2021, the year of post-pandemic recovery when economic stimulus flowed abundantly, and interest rates hovered near zero. Back then, stimulus packages worth $4 trillion fuelled an explosion of spending, and there was little mention of economic downturns. Fast forward to today, and we are looking at a different backdrop entirely.
The current market’s resilience has been nothing short of remarkable. Even as recession warnings for 2025 loom large—70% odds, according to some estimates—the S&P 500 keeps defying expectations. For those keeping a close eye on the numbers, this market’s endurance is unmatched in history. And for the lucky few who placed the right bets, it’s been a windfall. Take, for instance, a recent alert for premium subscribers, predicting the index’s milestone run to 6,000. The forecast came true in a post-election rally that has now netted gains of 1,500 points since early August.
However, history has a way of humbling even the most ardent optimists. Recalling 2021’s market boom may send chills down the spines of seasoned investors. The S&P 500’s record streak that year was followed by a 2022 bear market that punished tech stocks with losses exceeding 50%. Gains were wiped out as sentiment shifted abruptly. Even looking back further, in 2017, another year that logged over 60 all-time highs, there were subsequent corrections that proved painful. A chart tracking the S&P 500’s annual returns paints a cautionary picture: every year since 2000 with over 45 all-time highs has been succeeded by a “red” year, where the market saw a decline. On average, that drop has been 8.8%.
Yet, bulls have reason to remain hopeful. Before 2000, when the market saw similar winning streaks, the years that followed often brought more gains. Between 1980 and 2000, every year that witnessed over 50 all-time highs enjoyed an average increase of 24.4%. There’s no easy answer, and today’s analysts are divided, with bears pointing to recent patterns and bulls banking on past resilience.
One undeniable fact is that the S&P 500’s propensity for hitting new records this year has been well above average. Historically, it scores a high close on about 7.9% of trading days, but 2024 has surpassed that trend. Speculation has begun swirling around the possibility of 70 or even 80 all-time highs before year-end. The latter has never been reached, so the prospect alone has investors bracing for the unknown.
Of course, the question remains: what’s next? Elevated market activity often foreshadows volatility. While some may fear an outright crash, that isn’t a given. What’s more plausible, at least in the near term, is a bumpy ride ahead. Steep declines or straight-line gains may be unlikely, but sudden swings are certainly on the cards. For now, the prevailing wisdom is to stick with the upward momentum as dip-buying continues to be a successful strategy.
That said, one should remain wary. The warnings are there, and history doesn’t always repeat, but it often rhymes. For those who prefer to read the charts, the odds seem to favour caution moving forward. But for now, in a market where all-time highs have become a regular feature, the optimists are having their moment. How long it lasts is anyone’s guess, but 2024 has already written itself into market history.
