How much will the S&P 500 rise this year after rising nearly 19%? This is what history shows.

At the end of August last year, S&P 500 increased by 17%. Fast forward to 2024 and the index is up nearly 19%. As they say in New Orleans, “Laissez les bons temps rouler” – let the good times roll.

But will the good times keep rolling? How much will the S&P 500 rise this year? This is what history shows.

Image source: Getty Images.

Looking back

In 2023, the S&P 500 rose another 5.6% between September 1 and December 31, after a 17.4% gain in the first eight months of the year. Is this a historically typical performance? In short, yes — at least in recent decades.

Going back to 1994, the average S&P 500 gain over the last four months of the year was 4.34%. However, this percentage is somewhat skewed by the huge market crash in the latter part of 2008 during what became known as the Great Recession. The S&P 500’s average gain over the past four months was 6.51%.

What if we only look at years like 2024 when the S&P had positive gains in the first eight months? The numbers look even better. The average return of the index in the last four months of those years was 4.71%, while the average return was 7.2%.

Additionally, the strong momentum in the first eight months of the year typically led to strong gains in the last four months as well. The S&P 500’s average gain in the last four months of the year, when the index rose by a double-digit percentage in the first eight months, was 8.61%. The average gain over the last four months in these years was 9.24%.

The effect of the year of the presidential election

You may have heard of the Presidential Election Year Effect. Data from Morningstar and Ibbotson Associates showed that the average return of the S&P 500 during US presidential election years from 1928 to 2016 was 11.28%. The S&P 500 is up 16% in 2020, despite falling earlier in the year due to the COVID-19 pandemic.

How did the S&P 500 perform in the last four months of the presidential election? It’s not spectacular, but it’s not bad either, at least if we look back over the last five decades or so.

The average gain of the index during the last four months of the 1972 presidential election was only 1.85%. Note, however, that the bursting of the stock market bubble in late 2000 and the selloff in late 2008 brought this average down. The average S&P 500 gain during the period was 4.72%.

Why do presidential elections have an impact on the stock market? One possibility is that the incumbent party will do everything it can to prop up the economy to retain power. Another is that the presidential challenger usually tries to make the case that he or she will enact policies that are even better for the economy (which usually translates into good news for stocks).

The best answer

So how much will the S&P 500 rise this year? The best answer is… no one knows for sure. If history is any guide, however, the index is more likely to continue rising than falling in the final four months of 2024.

Smart investors will be more concerned with how the S&P 500 will perform over the next five years, 10 years and beyond. Historically, the outlook looks very good for the S&P over the long term.