The Next Pullback Won’t Derail the Bull Market

It’s undeniable at this point…

Stocks are off to a strong start this year.

The benchmark S&P 500 Index has soared about 10% so far in 2024. It has made new all-time high after new all-time high.

Now, I get that things are looking a bit lofty. And I realize that probably gives you pause.

Beyond that, stocks haven’t even pulled back significantly in many months…

From August through October, the S&P 500 entered “correction” territory with a roughly 10% drop. But since then, the market has churned higher and higher.

That’s an incredible run in a short span. And put simply, we’re due for a pullback.

But if you’ve been following along here at the Chaikin PowerFeed in recent months, you know that…

I don’t believe the next pullback will derail the bull market. And I have data to back that up…

As I told PowerFeed readers earlier this month

The final seven months of presidential-election years (from June 1 to December 31) are often the best-returning months. In 16 of the past 18 presidential-election years, the S&P 500 was up over that span. And in all those instances, the index averaged a 10% gain.

That’s not all…

A strong opening to the year is historically a “bullish” sign.

Financial-services company Carson recently looked at S&P 500 data throughout history…

Since 1954, the market has gained at least 5% over the first 50 days of the year 25 times. And 24 times (96%), the market finished the year even higher.

In fact, the average return for the rest of the year in all instances was nearly 13%. (The median was roughly the same, too.)

That’s huge.

History tells us the broad market could end the year up another 13% from its current level. That’s true even if we endure a short-term pullback.

And we have one more tailwind behind stocks right now…

Last Wednesday, Federal Reserve Chairman Jerome Powell made a bold statement.

He said that, despite the recent bump up in inflation, the Fed still forecasts three rate cuts before the end of the year.

This is a big deal for the stock market. It means that the Fed is about to take its foot off the economic “brake pedal.”

Keep in mind that lower rates translate to lower costs for businesses and lending. And that, in turn, will create a tailwind behind stocks for the rest of the year.

Put simply, a massive opportunity still exists in stocks right now. It doesn’t matter if the S&P 500 looks a little overextended in the short term.

So as I’ve said many times, I’m still “bullish” for the rest of 2024.

Sure, there will be a pullback at some point. That’s just the reality of the short-term market outlook. But that doesn’t mean it’s time to run for the hills.

We have the historical presidential-election-year market pattern on our side. And we have the strong start to the year so far in stocks. On top of that, the Fed is about to create a broad macroeconomic tailwind.

I encourage you to stay “bullish” for the rest of 2024, too.

Good investing,

Marc Chaikin

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