According to a recent analysis by Ned Davis Research, if the S&P 500 reaches a new all-time high in 2024, it could signal a strong year of gains to follow. The investment firm found that in years where the stock market hits at least one record high, the median return for that year is around 15%. This data point suggests that strength in the market tends to lead to further strength, and historically, stocks have not typically crashed from all-time highs.
While this stat is not foolproof, as evidenced by the market's decline in 2022 after hitting a record high in the first week of January, the overall trend since 1944 has shown that the market tends to continue rising after new record highs are achieved.
Currently, the S&P 500 is less than 2% away from reaching a new all-time high, which means that 2024 could be another year of double-digit returns if the index surpasses this milestone. Additionally, if the S&P 500 manages to hit multiple record highs throughout the year, the gains could potentially be even stronger. Historical data shows that in years with more than seven record highs, the median gain for the year is 19%, and with more than 35 records, the median gain is 25%.
It is worth noting that record highs are not uncommon, as seen in 2021 and 2017 when the S&P 500 achieved 70 and over 60 record closing highs, respectively. Both of these years resulted in strong returns for the index.
Furthermore, if a record high is reached this year, the positive momentum could spill over into 2025. Ned Davis Research found that the median gain in the year following a record high is approximately 8%.
In summary, the analysis suggests that stocks reaching record highs is a bullish sign for the market, indicating the potential for further gains. However, it is important to consider that market trends can be unpredictable, and historical patterns do not guarantee future outcomes.