As investors look back on the strong first quarter of the year for the stock market, there is a growing sense of unease about what the rest of the year may hold. According to CFRA’s Sam Stovall, the recent performance of the S & P 500 may be painting a picture of potential volatility in the coming months. While the first quarter saw significant gains, the second quarter has already kicked off on a negative note, with the market experiencing losses and the 10-year Treasury note yield reaching its highest level since November.
Stovall’s analysis of historical data points to a potential rollercoaster ride for investors in the stock market. While a strong first quarter often indicates a positive second quarter, it also comes with the warning that significant setbacks could be on the horizon. In fact, after 13 of the 15 strongest first quarters since World War II, the S & P 500 saw declines of 5% or more at some point during the year, with an average loss exceeding 11%.
The recent uptick in market volatility can be attributed to a variety of factors, including stronger economic data suggesting that Federal Reserve rate cuts may be delayed or less frequent than expected. As a result, investors have been taking profits and reevaluating their positions in anticipation of potential market turbulence. Stovall stresses the importance of sticking with winning positions, pointing to tech stocks as a potential outperformer by the end of 2024 despite a rocky start to the second quarter.
Despite the looming threat of increased volatility, Stovall’s analysis offers a glimmer of hope for investors. While the road ahead may be bumpy, historical data shows that the S & P 500 has ended most years with double-digit full-year price increases, averaging nearly 23%. Only in rare cases, such as in 1987, did the market see low single-digit gains. This indicates that even in the face of short-term turbulence, long-term investors may still come out ahead by sticking with their investments.
The stock market’s performance in the first quarter of 2024 may have set the stage for a potentially volatile year. While the immediate future may be uncertain, historical trends suggest that those who weather the storm and remain committed to their investments may see positive returns in the long run. It is essential for investors to stay informed, remain vigilant, and make strategic decisions to navigate the challenges and opportunities that lie ahead in the ever-changing landscape of the stock market.