There's a better way to invest than trying to predict the future based on the past.
The markets have started 2024 strong, with the S&P 500 rising 1.6% in January. And that's after coming off a solid year in 2023, where the index rose by 24%. Despite concerning geopolitical conditions and the possibility of a recession on the horizon, the stock market has performed well over the past year, and doesn't show signs of slowing down.
But is there any real significance to the S&P 500's strong January?
A good start isn't uncommon for the S&P 500
I pulled the historical data for the S&P 500 going back to 1973, and can confirm that the markets get off to a good start more often than not.
In the previous 51 years, there have been 27 times when the index was up at least 1% in January. That's 53%, slightly more than half of the time, that the S&P starts the year in the green.
How does the S&P 500 normally perform in the months following a good January?
The annual return in the years where the index was up at least 1% in January has been 16.8%. And on average, the index rose another 11.2% in the remaining months, which suggests that it's not too late to invest in the markets even if you hop in after January.
There have, however, also been years where the index had negative returns despite a good early start:
- In 2018, the S&P 500 declined by 6.2% even though it jumped by 5.6% in January.
- In 2001, it declined by 13% despite achieving 3.5% gains in the first month.
- In 1994, it fell by 1.5% after generating returns of 3.2% in January.
The moral of the story is that there aren't any guarantees that just because the S&P 500 had a good start that it'll be smooth sailing for the rest of the year. Every year is different, with its own unique set of challenges.
For 2024, regardless of how the markets did in the first month, what will likely be much more important is how many interest rate cuts there will be this year, whether the economy will slide into a recession, and how strong travel demand and consumer spending will be. Those are all factors that will play much more significant roles in determining whether 2024 will be a good year for the markets than whether January was a good month.
Investors should focus on quality stocks, not market trends
Investing based on past trends can be dangerous, since no two years are going to be exactly alike. Instead of trying to predict where the markets will go, a better move for investors would be to buy quality investments and hang on to them for the long haul. And if you're not sure which individual stocks to pick, an exchange-traded fund (ETF) like the Vanguard S&P 500 ETF can be an easy alternative to consider.
This ETF invests in all the companies in the S&P 500 and has a low expense ratio of just 0.03%. It can be a good investment to put money into because the odds are good that regardless of what happens in any single year, the S&P 500 will rise in value in the long run. That's a much safer move to make than betting on any single year on its own.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
FAQs
The index has returned a historic annualized average return of around 10.26% since its 1957 inception through the end of 2023.
How much has the S&P 500 gone up every year? ›
Bottom Line. Since 1957, the S&P 500's average annual rate of return has been approximately 10.5% (through March 2023) and around 6.6% after adjusting for inflation.
How is the S&P 500 performance in February 2024? ›
February 2024 was the second consecutive month the S&P 500® broke its all-time high, as it rallied by 5.17%. U.S. 10-year Treasuries, as represented by the iBoxx $ Treasuries 10Y+, continued to give up their 2023 gains, retreating 2.39%. This brings their YTD return to -4.14% and yield to 4.53%.
What is the average return of the S&P 500 in the last 10 years? ›
The historical average yearly return of the S&P 500 is 12.68% over the last 10 years, as of the end of February 2024. This assumes dividends are reinvested. Adjusted for inflation, the 10-year average stock market return (including dividends) is 9.56%.
What is the average return of the S&P 500 in the last 30 years? ›
Looking at the S&P 500 for the years 1993 to mid-2023, the average stock market return for the last 30 years is 9.90% (7.22% when adjusted for inflation). Some of this success can be attributed to the dot-com boom in the late 1990s (before the bust), which resulted in high return rates for five consecutive years.
What is the S&P 500 1 year return? ›
Basic Info. S&P 500 1 Year Return is at 27.86%, compared to 28.36% last month and -9.30% last year.
What is the return of the S&P 500 for the last 3 years? ›
S&P 500 3 Year Return is at 32.26%, compared to 33.72% last month and 58.99% last year. This is higher than the long term average of 23.25%. The S&P 500 3 Year Return is the investment return received for a 3 year period, excluding dividends, when holding the S&P 500 index.
What is the expected return of the stock market in the next 10 years? ›
U.S. stock returns: 2023 optimism carries forward
This heightened optimism is on par with the positive outlook in December 2021, when investors anticipated a 6% stock market return for 2022. Investor expectations for stock returns over the long run (defined as the next 10 years) rose slightly to 7.2%.
What is the average 5 year return on the S&P 500? ›
S&P 500 5 Year Return is at 85.38%, compared to 83.02% last month and 55.60% last year. This is higher than the long term average of 45.20%. The S&P 500 5 Year Return is the investment return received for a 5 year period, excluding dividends, when holding the S&P 500 index.
Which stock gives the highest return in 1 year? ›
Highest Return in 1 Year
| S.No. | Name | CMP Rs. |
|---|
| 1. | Spright Agro | 33.79 |
| 2. | Jai Balaji Inds. | 1027.75 |
| 3. | Waaree Renewab. | 2480.50 |
| 4. | Piccadily Agro | 667.25 |
23 more rowsS&P 500 YEAR-END FORECAST YET. Both Capital Economics and Yardeni Research have recently floated similar scenarios. Yardeni Research president Ed Yardeni has a 5,400 target for the end of 2024 but sees the benchmark hitting 6,000 in 2025 and 6,500 in 2026.
Where is the stock market headed in 2024? ›
The S&P 500 generated an impressive 26.29% total return in 2023, rebounding from an 18.11% setback in 2022. Heading into 2024, investors are optimistic the same macroeconomic tailwinds that fueled the stock market's 2023 rally will propel the S&P 500 to new all-time highs in 2024.
What are the stock market predictions for 2024? ›
2024 stock market outlook
Next year, investors can expect declining inflation, reasonable economic growth, and potentially, interest rate cuts by the Federal Reserve, according to Niladri Mukherjee, Chief Investment Officer for TIAA Wealth Management.
What was the stock market summary in January 2024? ›
Global markets were a mixed bag to start the new year. After a rally in almost every asset class to end 2023, January saw US stocks rise 1.68%, while US Investment Grade Bonds fell 0.28%.
Will S&P500 go up in 2024? ›
The large-cap benchmark S&P 500 index SPX on Thursday notched its 20th all-time closing high in 2024, while the Nasdaq Composite COMP ended at its fourth all-time high and the Dow Jones Industrial Average DJIA scored its 16th record close so far this year, according to Dow Jones Market Data.
What is the 12 month return on the S&P 500? ›
Basic Info. S&P 500 12 Month Total Return is at 29.88%, compared to 30.45% last month and -7.73% last year.
What are the top performing stocks in January 2024? ›
Meta Platforms, Inc. (NASDAQ:META), Netflix, Inc. (NASDAQ:NFLX), NVIDIA Corporation (NASDAQ:NVDA), and Advanced Micro Devices, Inc. (NASDAQ:AMD) are some top performing growth stocks in 2024.
