How much higher will the S&P 500 go this year after a nearly 19% jump? Here’s what history shows.

At the end of August last year the S&P 500 was up 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 last? How much higher will the S&P 500 go this year? Here’s what history tells us.

Image source: Getty Images.

Looking back

In 2023, the S&P 500 rose another 5.6% between Sept. 1 and Dec. 31, after gaining 17.4% in the first eight months of the year. Is that typical historical performance? In short, yes — at least over the past several decades.

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

What if we look at just years like 2024, when the S&P posted 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 median return was 7.2%.

Moreover, strong momentum in the first eight months of the year has typically led to big gains in the last four months. The average S&P 500 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 median gain in the last four months during those years was 9.24%.

The Effect of the Presidential Election Year

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 U.S. presidential election years between 1928 and 2016 was 11.28%. The S&P 500 rose 16% in 2020, despite a decline earlier in the year due to the COVID-19 pandemic.

How has the S&P 500 performed in the last four months of presidential election years? Not spectacular, but not bad either, at least when we look back over the last five decades or so.

The average gain for the index in the last four months of presidential election years since 1972 was just 1.85%. Keep in mind, however, that the bursting of the stock market bubble in late 2000 and the sell-off in late 2008 brought that average down. The median S&P 500 gain during the period was a more respectable 4.72%.

Why do presidential elections affect the stock market? One possibility is that the incumbent party does everything it can to support the economy in order to stay in power. Another possibility is that the challenger for the presidency usually tries to claim that he or she will implement policies that are even better for the economy (which is usually good news for stocks).

The best answer

So how much higher will the S&P 500 go this year? The best answer is… no one knows for sure. If history is any guide, though, it’s more likely to keep rising than to fall in the final four months of 2024.

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