2024 Market Outlook - 3/4 Pole

Eric Parnell, CFA |
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March 28, 2024

By Eric Parnell, CFA, Chief Market Strategist, Great Valley Advisor Group

Hard to believe the first quarter of 2024 is drawing to a close. As we pass the 3/4 pole in our 8 furlong race through the calendar year, it is worthwhile to assess the key market events that are now behind us and what lies ahead in the horse race to the year-end finish line.

Starting gates. A key market theme at the starting gates was that the U.S. stock market was due for some sort of consolidation. In the final two months of 2023, the S&P 500 following an August to October pullback that shaved -11% staged a furious +17% rally in the final two months of the year. This sent the headline index towards three challenging junctures from a technical analysis perspective.

 

Not only was the S&P 500 heavily overbought with a Relative Strength Index (RSI) reading well over 70, but the market had also returned to the top of its trading channel dating back to the October 2022 lows. At the same time, the benchmark index surged all the way back to its previous all-time highs set two years ago in January 2022 before the onset of the inflation fueled bear market. Why does this last point matter? Because selling pressure increasingly sets in among those investors that flooded into the market at the previous all-time highs subsequently spent the last two years waiting to get back to breakeven to get their initial investment back. Add to all of these technical forces the fundamental reality that stocks were historically overvalued and the economy was bracing for a potential recession in 2024, and the stage was set for stocks to start the year at a walk or trot at best.

3/4 Pole. The various forces pulling up the reins at the start of the year has made the galloping pace of the market all the more striking. Stocks barely paused for a few trading days to open the year before breaking out to the upside above its various resistance levels.