{"id":44254,"date":"2023-08-03T23:10:52","date_gmt":"2023-08-04T03:10:52","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/sp-500-soared-near-tipping-point-in-2023-what-history-shows-may-happen-to-stocks-after-such-a-strong-rally\/"},"modified":"2023-08-03T23:10:54","modified_gmt":"2023-08-04T03:10:54","slug":"sp-500-soared-near-tipping-point-in-2023-what-history-shows-may-happen-to-stocks-after-such-a-strong-rally","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=44254","title":{"rendered":"S&P 500 soared near \u2018tipping point\u2019 in 2023. What history shows may happen to stocks after such a strong rally."},"content":{"rendered":"
\n

The U.S. stock market\u2019s big run-up in 2023 left the S&P 500 near a \u201ctipping point\u201d that set the index up for a choppier second half of the year, according to Ned Davis Research\u2019s chief U.S. strategist Ed Clissold.\u00a0<\/p>\n

The S&P 500 gained 19.5% this year through July for its best seven months of a year since 1997. The rally put the popular stock-market benchmark near a tipping point in terms of momentum and mean reversion, Clissold said in an Aug. 2 note.<\/p>\n

\n

After such strong gains, he looked at what historically happened to the S&P 500 after rising at least 15% during the first seven months of a year. Clissold found that \u201cover the last five months of the year, the index rose 86.4% of the time by a median of 7.0%.\u201d\u00a0\u00a0<\/p>\n

\u201cFor now, we are maintaining our overweight to stocks in our U.S. asset allocation,\u201d he said. \u201cMean reversion has been more likely if year-to-date gains have exceeded 20%.\u201d<\/p>\n

<\/p>\n
<\/p>\n<\/figure><\/div>\n

Clissold said his findings provide \u201conly a glimpse into the full story of how each of those years unfolded\u201d after the S&P 500 rallied at least 15% through July, saying \u201cblowoff tops, recessions, wars, Fed cycles, and other macro drivers determined whether the good times continued to roll.\u201d<\/p>\n

But in most of the cases, the S&P 500\u2019s momentum waned over the last five months of the year, according to the note.\u00a0<\/p>\n

\u201cStrong starts to the year are followed by smaller gains the rest of the year, on average,\u201d said Clissold. \u201cIn only one case, 1935, did the S&P 500 post a bigger gain after July than before it.\u201d\u00a0\u00a0<\/p>\n

Read:<\/strong> \u2018Rare\u2019 rally in cyclical stocks largely over, Goldman warns, after ETF investors favored such areas of the market<\/p>\n

The S&P 500 has slipped 1.9% so far in August, largely courtesy of a sharp drop on Wednesday. But on Thursday, it remained up more than 17% for the year in an economy that\u2019s been resilient despite the Federal Reserve\u2019s interest-rate hiking campaign begun in early 2022.\u00a0<\/p>\n

See: <\/strong>A giant wealth transfer explains why the economy isn\u2019t responding to Fed policy: Ray Dalio<\/p>\n

Major U.S. stock indexes closed modestly lower Thursday, as investors weighed fresh economic data showing a slight rise in initial jobless claims and an increase in labor productivity\u00a0during the second quarter. The Dow Jones Industrial Average
\n DJIA
\n fell 0.2%, while the S&P 500
\n SPX
\n slid 0.3% and the Nasdaq Composite
\n COMP
\n declined 0.1%, according to FactSet data.<\/p>\n

While the Fed has been tightening its monetary policy to bring down elevated inflation, the U.S unemployment rate has so far remained low.<\/p>\n

\u201cThe most aggressive tightening cycle in at least 40 years was the primary reason for last year\u2019s equity bear market,\u201d said Clissold. \u201cThe anticipation of a slower pace of rate hikes and eventual end to the tightening cycle has been one of the main drivers of this year\u2019s bull market.\u201d<\/p>\n

See:<\/strong> Fed\u2019s Barkin says economy might avoid recession if inflation continues to ease<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The U.S. stock market\u2019s big run-up in 2023 left the S&P 500 near a \u201ctipping point\u201d that set the index up for a choppier second half of the year, according to Ned Davis Research\u2019s chief U.S. strategist Ed Clissold.\u00a0 The S&P 500 gained 19.5% this year through July for its best seven months of a […]<\/p>\n","protected":false},"author":1,"featured_media":44255,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-44254","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nS&P 500 soared near \u2018tipping point\u2019 in 2023. 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