-
Santa Claus’s failed run ended the possibility of a “January Trilogy” for the stock market.
-
But that doesn’t mean stocks can’t continue to rise as they have in 2023.
-
The continued resilience of the US economy bodes well for positive stock market returns this year.
The S&P 500’s five-day losing streak ended the possibility of a “January triple” in the stock market this year, but that doesn’t mean stocks won’t rally in 2024.
The January Trifecta refers to three indicators that flashed positively at the beginning of the year: stocks moving higher during Santa Claus’s walk, the first five trading days of the year, and the entire month of January. When gains are recorded in all three time frames, history shows that what follows is a great year for the stock market.
The Santa Claus rally has failed to generate a positive return, and it seems increasingly likely that the first five trading days of the year will also generate a negative return. So, the January Trifecta is completely off the table.
But the failed rallies at the start of the year ignore the fact that stocks have been on a tear since the end of October, so a period of consolidation and profit-taking was overdue, according to Carson Group chief investment strategist Ryan Detrick.
“Yes, stocks just fell during one of the bullish times of the year during the Santa Claus Rally, but I think it’s important to remember that the S&P 500 also rose for 9 straight weeks during this period. That was the longest period of time,” Detrick told Business Insider. “We’ve had a winning streak since 2004, so something had to happen eventually.”
Detrick’s recent stock rally suggests the market is set to see a period of sideways consolidation over the next few weeks, if not the entire first quarter of the year. This is in line with the seasonality associated with the presidential cycle, which is now in its fourth year with the 2024 elections approaching.
“It could mean that January is going to take a pause. And maybe even the first quarter overall. We just had a historic jump in the last two months of 2023, so some kind of pause would be completely normal. Also, if you look at all 16 quarters,” Dietrich explained, “In a four-year presidential cycle, you’ll find that the first quarter of the election year tends to be one of the weakest periods.”
It is important to highlight that statistical studies of historical price movement in the stock market, which Dietrich and many other Wall Street strategists use in their process, are not intended to be a prediction of what will happen, but rather provide a range of possibilities. For investors about what might happen.
There’s a bigger, more important aspect of the overall stock market picture, and that’s the economy, which is why Detrick remains bullish on stocks this year despite the Trifecta fiasco in January.
“I’m a fan of using history as a guide, but that’s only part of the story. For us, knowing that the economy is on the right foot, profits should hit a record high this year, and the consumer continues to be healthy, with manufacturing all over the place,” he says. Of housing and housing are signs of recovery, these things are more important. If we can avoid a recession this year (our base case), it still makes sense to expect stocks to perform well this year, perhaps rising by low double-digits,” Detrick said.
The December jobs report once again exceeded economists’ estimates with 216,000 jobs added to the economy. This means that 2.7 million jobs were created in 2023, and there have been 36 consecutive months of job gains. With the unemployment rate still hovering at a multi-decade low of 3.7%, the economy appears to be in good shape, lending credence to Detrick’s optimistic outlook for 2024.
Read the original article on Business Insider