The broad-market S&P 500 Index posted a series of new all-time highs over the past month…
Yesterday, the index closed at nearly 5,634
Now, the S&P 500 is up about 18% this year. And the tech-heavy Nasdaq 100 Index is up even more. So far in 2024, it has posted a roughly 23% gain.
But here’s the thing…
This rally is starting to go beyond the so-called “Magnificent Seven” mega-cap stocks.
Since the S&P 500 began moving higher in October 2022, it has gained around 57%. That’s a huge move for a major index in less than two years.
And of course, many of the Magnificent Seven stocks have crushed that return.
At the same time, the other 493 stocks in the index are up around 36%.
That’s worth noting because many investors think that the market’s biggest and most popular stocks are the best long-term winners. But history tells us that’s not true…
According to asset manager Schroders, the biggest and most popular stocks in the market would’ve turned every $100 into about $15,600 from 1966 through early 2019.
That’s a solid return, of course. But it was nowhere near as strong as small-cap stocks.
With small-cap stocks, every $100 would’ve turned into more than $56,000 over the same period. That’s a remarkable level of outperformance over the long term.
And importantly, it’s where the opportunity lies now for savvy investors like us…
Put simply, I expect the market’s rally to broaden out in the coming months. And as that happens, the small- and mid-cap stocks in the S&P 500 will see the biggest boosts.
The 36% gain from earlier shows us that this part of the market is already picking up steam. And I expect this shift to accelerate in the weeks, months, and years ahead.
Will corrections occur along the way? Of course.
Will a bear market happen at some point down the road? Almost certainly.
But overall, the future remains bright for U.S. stocks – especially small- and mid-cap stocks.
The negativity in the mainstream media only gets worse in a partisan presidential-election race. We’re fighting through all that “noise” in this part of the election cycle right now.
Meanwhile, my election-year thesis remains alive and well.
I’m still optimistic on stocks through the rest of 2024 – and beyond. I believe the S&P 500 could approach 6,000 by the end of the year. That’s more than 6% above its current level.
Earnings will continue to drive the market. And second-quarter earnings reports should be strong.
In the end, don’t lose sight of the overall point of investing…
The stock market tells us all we need to know. It’s posting new all-time highs over and over. And just like everything in life, we should follow a simple principle in the markets…
Believe what you see, not what you hear.
Good investing,
Marc Chaikin
