Where will stocks head in 2024?
You could look for answers in dozens of different places… You could focus on what’s next for the economy. You could do a deep dive into market fundamentals. Or you could analyze the Fed’s next move and decide if it’s bullish or bearish.
I’ve got a much simpler way to answer that question, though.
Stocks are set to head higher this year because good years tend to follow good years.
Last year was a great year for investors. Stocks rose 26%. And 2023’s strong finish tells us stocks could jump 19% this year.
Let me explain…
It might surprise you. But years with gains of 20% or more aren’t rare at all for the U.S. stock market.
They’ve happened 21 times – last year included – since 1950. That’s more than a quarter of the time.
Stocks also tend to keep winning after those big years. The market was up by 10% or more 55% of the time a year after a 20%-plus gain. And the overall probability of profits was 80%. That’s better than the typical 73% probability of gains in a random year.
What’s more, how we ended 2023 points to massive upside potential this year.
Specifically, stocks had an incredible run in November and December. The S&P 500 Index was up 14% in those two months. Take a look…
This was the best November and December we’ve seen since 2020. And aside from that year, it’s the best end to a year we’ve seen since 1950.
It’s rare to end a year with this kind of powerful two-month run. We’ve only seen six other November and December gains of 10% or more since 1950.
That means this type of year-end setup has only happened 13% of the time. But when it does happen, the year that follows has always been a big winner. Take a look…
I’ve written it over and over again in DailyWealth… Owning stocks for the long haul is a nearly foolproof way to build wealth. The market has produced 9.1% annual gains since 1950. Few assets can compete with those long-term returns.
Still, you can do much better if you own stocks at the right times. And buying after a 10%-plus gain in November and December is the right time.
Similar setups led to 6.5% gains in three months, 12.8% gains in six months, and 19.4% gains over the next year. That’s more than double the typical annual return for stocks.
The odds of big gains are almost certain, too. That’s because stocks were higher a year later 100% of the time. Even better, stocks were up by 11% or more 100% of the time a year later.
Many investors are unsure of where stocks will head this year. But good years follow good years. A powerful year-end rally all but ensures more gains will follow.
The data points to double-digit upside this year. That’s one more reason why we want to own stocks today.
Good investing,
Brett Eversole
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Source: Daily Wealth