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After such a strong year for equities in 2023, it may seem odd to think that 2024 could pad those already healthy gains. There are, however, a couple of reasons (besides the government’s persistent aid of the stock market) to consider this might be the case.
- The Presidential election year cycle tends to favor it. According to Merrill Lynch’s research, the strongest year is the third (which we’ve just had) at an average of +13.46%, whereas the second strongest is the fourth (which will be 2024) that clocks in with an average of 7% gains. The second year, at 4.49%, and the first, at 3.96%, are the laggards.
- Lifetime highs tend to beget more lifetime highs. As the ancient saying goes, trees do not grow to the sky, but until they stop growing……….they do. Below are seven major U.S. indexes which are presently at lifetime highs, having soared particularly strongly in recent weeks.
Regarding that second point, the reason highs tend to lead to new highs is fairly simple: everyone participating in that financial instrument is already a winner and, thus, optimistic. There is no overhead supply to contend with. In other words, there are no prior buyers in a losing position who are eager to get out. Added to this, the media (and featured tables in financial sections) draw attention toward new highs, which only adds to the excitement around a particular security or sector.
Having said that, the indexes at or near lifetime highs presently include the Dow Jones Large Caps:
The Dow 30 Industrial Average:
The tech-heavy NASDAQ 100:
The S&P 100:
The Semiconductor index, lead by Nvidia:
The Major Market Index, which has been especially strong:
And the Broker/Dealer index:
There are a couple of slight laggards whose participation which strengthen the bullish case. First there is the Dow Transportation Index, which is not confirming the Industrial’s recent record highs:
And, of course, the S&P 500, which has been powered almost entirely by “The Magnificent Seven” but whose other 493 components really need to start pulling their own oars.
This is not to say the market is cheap. On the contrary, there market is, in some respects, more expensive than ever, and tech stocks in particular are valued by some metrics at levels much higher than the Internet bubble. One should also keep in mind that, as with early January 2022, sometimes markets can simply grind to an immediate hall for no clear-cut reason (except there are more sellers than buyers).
Until such time as the steady drumbeat of Lifetime Highs ceases, however, there is plenty of room for the bulls to be optimistic in the year ahead.
Of course, I hope I am dead wrong!
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