It was a banner year for stock markets in the United States, with the S&P 500 Index (SP: .INX) gaining 24.7% in 2023.
It was a good year in Australia too, with the S&P/ASX 200 Index (ASX: XJO) up 9.3% for the year. And if you add dividends back in, that's closer to a 13.9% gain.
But clearly, the S&P 500 led the charge.
In fact, the index of 500 leading US stocks finished within a whisker of its all-time highs, ending the year at 4,770 points. That's just 0.5% away from the record highs posted on 3 January 2022.
And this stellar performance came despite stubbornly high inflation and a series of US Federal Reserve interest rate hikes that many doomsayers had forecast would see global and Aussie shares tank.
So, with these kinds of explosive gains already in the bank, can the stock market rally run on in 2024?
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What's the outlook for the S&P 500 in 2024?
For some insight into what we might expect from the S&P 500 in the year ahead, we defer to the experts (courtesy of The Australian Financial Review).
Adam Turnquist, technical strategist at LPL Financial, noted that "Momentum remains overbought but bullish as the rally broadens out."
Despite this overbought momentum scenario, Turnquist believes US stocks could continue to deliver some outsized gains in 2024.
"It is important to note that in strong uptrends/bull markets, overbought conditions can persist for meaningful periods," he said.
Turnquist added:
And while extremely overbought conditions raise the odds of a temporary pause or pullback, longer-term returns have been positive and above average based on comparable periods.
Yardeni Research also said that, "Arguably, the bull market is overbought, and there are too many bulls."
Yardeni noted that this doesn't mean the S&P 500 and other stock market indexes can't keep charging higher in 2024. But that charge higher may yet lead to a sharp retrace down the road.
"Meltups can go on for a while until, like Icarus, they get too close to the sun. In other words, they can lead to meltdowns if they rise too far too fast," Yardeni's analysts said.
As for the early part of 2024, Ned Davis Research said it is "overweight" on stocks.
"Entering 2024, we are overweight equities, underweight bonds, bullish on gold and bearish on the US dollar," the investment research firm said.
Some perspective
For some perspective on what to expect from the S&P 500, and ASX shares, in 2024, we turn to Scott Phillips, The Motley Fool's chief investment officer in Australia.
Phillips doesn't make predictions about how markets will move over any single given year.
As he notes, "Even in years when the bad news seems ascendant, the market can still rise, as it did in 2023."
And as an investor with a long-term horizon he adds, "Even when there's down years, the overall trend has continued to be up. Perspective — true, long-term perspective — can be the investor's best friend."
Wishing you a prosperous year of investing in 2024!
