As Thanksgiving nears, investors have substantial reasons for optimism, thanks to the recent upward trajectory in the market. Historical data suggests this trend might not only persist for the remainder of the year but also extend into early 2024.
Monday witnessed all three major indexes – Nasdaq Composite, S&P 500 , and Dow Jones Industrial Average – trading higher. This surge follows a remarkable performance in recent weeks. Notably, on Friday, the Nasdaq Composite recorded its highest three-week point gain in history. Silicon Valley has been a significant driver of the 2023 rally, but the surge was not confined to this tech-centric index alone.
The S&P 500, alongside Nasdaq and Dow Jones has seen a consistent rise over the past three weeks, culminating in a 9.6% increase. This growth represents the largest three-week point and percentage gains for the S&P 500 since the early stages of the Covid-19 pandemic in April and June 2020.
Several stocks within the S&P 500 have outperformed the index itself. Nvidia (NASDAQ:NVDA), a prominent tech player this year, saw a surge of over 23%. Additionally, Expedia Group (NASDAQ:EXPE), Generac Holdings (ticker: GNRC), Carnival (NYSE:CCL), and Paramount Global Class B shares (NASDAQ:PARA) have all experienced gains exceeding 30% since the market correction low on October 27.
These recent advancements have propelled the S&P 500 to a 7.6% rise in November alone, with a year-to-date increase of over 17%.
Despite these gains, some skepticism remains due to high interest rates, which are particularly challenging for high-growth tech stocks. However, historical data from Dow Jones Market Data suggests that the S&P 500 tends to sustain its upward momentum.
Since 1962, there have been 39 instances where the S&P 500 saw three-week percentage changes of 9% or more. Following these periods, the index typically continued to rise over one, two, three, four, and eight-week spans. On average, it gained 1.83% after one month and 3.91% after two months.
These positive trends hold true even when considering median gains, with the S&P 500 generally in the green over one, two, three, four, and eight-week periods. The median gain reaches 2.21% after four weeks and 3.3% after eight weeks, indicating a potentially bright end to the year and a positive start to 2024.
However, it’s important to note that this pattern has shown mixed results in recent years. The last three instances of the S&P 500 climbing more than 9% in three weeks occurred in April and June 2020. The outcomes were somewhat inconsistent, with the index dipping one week and one month out for the first and last of those periods. Nevertheless, it was higher eight weeks later in all three instances.
Featured Image – Freepik