THE BREW – October 2024
SAVE THE DATE
SEIA INVESTMENT ROUNDTABLE
DATE November 21, 2024
TIME 1:00pm – 2:00pm PST
We invite you to join our upcoming quarterly Investment Roundtable webinar featuring distinguished speakers: Sam Miller, Vice President of Investment Strategy at SEIA, and Phillip Argue, Director of Investment Strategy at SEIA.
Topics on the agenda include:
DON’T GET TOO GREEDY – TAKING STOCK AFTER TWO PHENOMENAL YEARS
The bull market in U.S. equities turned two years old this month. It may seem like a distant memory now, but in October 2022, we were wrestling with inflation above 8%, a Fed that was rushing to raise rates, and corporate earnings that were faltering due to high costs. On October 12, 2022, the S&P 500 closed at 3,577, down 25% from its peak at the beginning of the year.
Just two years later, the S&P 500 closed at a new all-time high of 5,859 (10/14/2024), or 57.5% higher. For context, this was in the top 5% of all two-year periods for the S&P going back to 1950 (chart below).
By any measure, it’s been a phenomenal run for U.S. equities. It’s also a pace that rarely lasts long. As the above chart illustrates, we tend to see returns moderate following major spikes. That doesn’t mean returns are likely to be negative going forward, but we should manage our expectations, as returns will likely be lower than we’ve experienced recently.
It’s also worth noting that this has been the best election year (+22.9%) for the S&P 500 since at least 1950 (through October 14). Historically, the stock market has averaged +7.1% during election years, slightly below the average annual gain of +9.1%. Using the average of all election years (red below), more than half the annual returns come after the last week of October.
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Below, we look at the path of all 19 election years since 1950, with the average in red and 2024 in blue. It’s interesting that 1980 (Reagan’s 1st Term, +25.4%) and 1996 (Clinton’s 2nd Term, +22.4%) were the only prior years that returned more than 20%.
Regardless of which party wins the White House in November, all indications point to further deficits in 2025 and beyond. While those deficits are likely detrimental in the long run, they also stimulate further economic growth in the short term.
Lastly, both candidates are making big promises on the campaign trail to appeal to undecided voters. Those promises rarely become policy without being heavily revised by cabinet members who understand the implications of those policies. So, regardless of who wins in November, don’t jump to any conclusions, especially about your investments. We will have plenty of time to assess the new administration’s policies, their impact on the economy, and adjust along the way.
In the meantime, let’s not forget it’s been a phenomenal two-year run.
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