A Stellar Start: The S&P 500’s First Quarter Sets the Stage for 2024

Record-Breaking Rally

The S&P 500 has kicked off 2024 with a performance that has not only been impressive but also historic. Despite a modest gain of 0.4% in a week shortened by holidays, the index’s journey through the first quarter has been remarkable, securing 22 record closes—the highest in a first quarter since the late ’90s.

A Look Back at History

With a 10.2% surge in the first three months, 2024 joins the ranks of 2012, 2013, and 2019 as one of the only years since the turn of the millennium to witness over 8% gains in its opening quarter. This feat was last achieved before the burst of the dot-com bubble in 1998, making it a rare occurrence since 1950.

Skepticism and Optimism in the Market

Despite the impressive start, some market observers remain cautious, pointing to a potential overvaluation driven by the fervor around artificial intelligence and the pervasive fear of missing out.

However, Nvidia’s recent triumphs suggest that AI’s influence on the market is more than just speculative excitement. Additionally, the broad-based nature of this year’s rally, with sectors like Health Care and Consumer Staples outperforming, provides a solid foundation for optimism.

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Historical Momentum Suggests Further Gains

Historical data offers a bullish outlook: nearly every time the S&P 500 has seen first-quarter gains of 8% or more since 1950, the momentum has continued through the year. Except for the anomaly of 1987, such years have on average seen an additional 9.7% increase over the following three quarters.

Managing Expectations

While the rest of the year might not mirror the exceptional growth of the first quarter, the precedent set by years like 2012, 2013, and 2019 shows that a strong start often heralds a year of overall positive returns, barring unforeseen market shocks.

As we move forward, 2024 stands as a testament to the market’s resilience and potential, with a beginning that promises much for investors, even as it calls for cautious optimism amidst high expectations.