The 2024 market has started strong. S&P500 It rose 1.6% in January. And that comes after a strong year in 2023, with the index up 24%. Despite the geopolitical situation and the possibility of a recession on the horizon, the stock market has performed well over the past year and shows no signs of slowing down.
But does the S&P 500’s strong January performance really mean anything?
Strong starts aren’t unusual for the S&P 500
When we looked at historical data for the S&P 500 going back to 1973, we found that the market often gets off to a good start.
Over the past 51 years, there have been 27 times in January when the index rose at least 1%. This gives him a 53% chance of the S&P starting the year in the green, just over half the time.
How does the S&P 500 typically perform in the months following a strong January?
In years when the index rose at least 1% in January, the annualized return was 16.8%. And in the remaining months, the index is up another 11.2% on average, suggesting it’s not too late to jump into the market after January.
However, there were some years when the index had negative returns despite an early start.
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In 2018, the S&P 500 index fell 6.2% despite rising 5.6% in January.
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In 2001, it fell 13% despite gaining 3.5% in the first month.
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In 1994, it fell 1.5% after posting a 3.2% return in January.
The moral of the story is that just because the S&P 500 is off to a strong start, there’s no guarantee that the rest of the year will be smooth sailing. Every year is different and has its own challenges.
Looking ahead to 2024, regardless of how the market performs in the first month, perhaps more important is how many interest rate cuts will occur this year, whether the economy will fall into recession, and how travel demand will change. I guess it depends on how strong personal consumption is. It will be. These are all factors that play a much more important role in determining whether 2024 will be a good year for the market than whether January was a good month or not.
Investors should focus on blue-chip stocks, not market trends.
No two years are exactly the same, so investing based on past trends can be dangerous. Rather than trying to predict where the market will go, investors are better off buying quality investments and holding on to them over the long term. If you are not sure which individual stock to choose, Exchange Traded Fund (ETF) like below Vanguard S&P 500 ETF This could be an easy alternative to consider.
This ETF invests in all S&P 500 companies and has a low expense ratio of just 0.03%. No matter what happens in a single year, the S&P 500 is likely to increase in value over the long term, making it a good investment to put your money into. This is a much safer move than betting on a single year.
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david jagielski has no position in any of the stocks mentioned. The Motley Fool owns a position in and recommends the Vanguard S&P 500 ETF. The Motley Fool has Disclosure policy.
The S&P 500 rose 1.6% in January. Here’s what historically happened in the market after his first month of success. Originally published by The Motley Fool
