New York, NY – The stock market’s strong performance in the first half of 2024 is setting up investors for a potentially lucrative rest of the year. With a 15% year-to-date total return in the S&P 500, it ranks as the 21st best performance through June since 1900, according to Goldman Sachs. Historically, years with similar gains at this point have seen further increases for the remainder of the year about 72% of the time, with a median additional gain of nearly 9%.
Investors have been enjoying an extraordinary reward-to-risk ratio, with the 12-month Sharpe ratio for the S&P 500 being over three times the long-term average. The index has seen a 33% increase since the low of the October 2023 correction, translating to an annualized total return pace of 56%. The market’s smooth ascent has not only allowed investors to rest easy at night but has also resulted in minimal volatility during the day, with the S&P 500 going eight sessions without a move of more than half a percent.
While the market is seemingly on a positive trajectory, there are some underlying concerns. The impressive returns have largely been driven by a few large-cap companies, leading to a significant performance gap between market-cap-weighted and equal-weighted versions of the S&P 500. However, there is still optimism for continued upside potential in the market, despite some credit conditions showing slightly less strength in recent weeks.
The market’s momentum has also experienced some hiccups, particularly in high-momentum stocks that have stumbled after peaking. Additionally, investors have been closely monitoring macroeconomic factors, such as fluctuations in Treasury yields and inflation, to gauge the market’s resilience in the face of potential challenges. While many Wall Street strategists have raised their year-end S&P targets, there are concerns about overly high expectations for some big-cap companies, which have led to volatile reactions to earnings disappointments.
Overall, while the market’s performance has been robust so far in 2024, there are lingering uncertainties and challenges that investors must navigate. It will be essential to monitor how the market adapts to these factors and whether the current momentum can be sustained in the months ahead.