Just because the market went up in 2023 doesn't mean it will go down in 2024.
Last year was one for the books in the stock market. The S&P 500 returned more than 25%, including dividends. That's an excellent gain and marks a strong recovery after 2022's near 20% decline.
But with such a strong year in the books, can investors expect the stock market to go higher in 2024? Let's look at history and see what happened in similar situations.
2023 was a great year, but it was far from out of the ordinary
For all of the historical annual returns, I'll utilize the total return metric, which includes the effects of dividends. While some investors choose to take their dividends in cash and not reinvest them, the market's long-term trend is up, making these withdrawals a mistake (unless you need the dividend income to fund retirement).
Since 1926, the market has had a total return of more than 25% 27 times (including 2023). That means the market delivers returns of this magnitude more than a quarter of the time. So, while this year was truly extraordinary for investors, it wasn't by any means all that unusual.
Part of 2023's success came from the big decline in 2022. Of the years where the market returned 25% or greater, six of the 27 came after a decline of 10% or more, and 11 came after a negative year.
But that brings up an interesting point: 16 of the 27 years where the stock market rose by at least 25% were preceded by a positive year. This is somewhat counterintuitive, but the conclusion here is that just because the market was up substantially in one year doesn't mean it will be down the next.
This is an important mindset focus for most long-term investors, as the historical trend for the stock market is up.
Although nobody knows what next year will bring, it would be nice to get a glimpse of what's possible.
The stock market's return for 2024 will be...
In the years after a gain of 25% or more, the average total return was 10.2% -- a phenomenal average return. The best year was 1927, which had a 44% total return. The worst year following a 25% return was 1936, with a 35% decline.
That's a wide range of results, which speaks to the random and unpredictable nature of the stock market.
This leads me to the following conclusions about what investors should do for 2024:
- If you don't have any urgent need for your money for the next three to five years, leave it in the market. Even after great years, the market still posts solid years on average.
- If you have a large expense (like building a house or buying a car) or are near retirement, ensure you have enough money to fund those expenses. However, completely going into cash is a mistake because you'll need the long-term returns to continue funding your activities.
- If you haven't started investing yet, now is the time. The historical trend of the market is up. While there may be plenty of reasons you can come up with not to invest (overvaluation, presidential elections, global turmoil), these events have been happening throughout the near century-long existence of the S&P 500. Buying an index fund like the Vanguard S&P 500 (VOO 0.53%) or the SPDR S&P 500 (SPY 0.52%) is a great decision to take advantage of this fantastic investment.
While I don't know what the stock market will do in 2024, history tells me it should be another positive year. We'll see what happens during the next 12 months, but I'm staying invested despite a phenomenal 2023.
Keithen Drury has positions in SPDR S&P 500 ETF Trust and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
FAQs
Analysts project 11.5% earnings growth and 5.5% revenue growth for S&P 500 companies in 2024. Fortunately, analysts see positive earnings and revenue growth for all eleven market sectors this year.
Does Motley Fool actually beat the market? ›
Performance. Motley Fool prides itself on the historical performance of Stock Advisor's investment picks. In fact, the team has an average stock pick return of 628% and has quadrupled the S&P 500 over the last 21 years, according to its website.
What stocks is the Motley Fool recommending? ›
The top 10 stocks to buy in September 2024
- CrowdStrike (CRWD 2.34%), $58 billion.
- PayPal (PYPL 0.73%), $66 billion.
- Airbnb (ABNB 0.73%), $72 billion.
- Shopify (SHOP 4.91%), $89 billion.
- MercadoLibre (MELI 1.4%), $96 billion.
- Walt Disney (DIS -0.09%), $156 billion.
- Intuitive Surgical (ISRG 1.38%), $165 billion.
The S&P 500 average return
So far, the average return for 2024 is around 116%. "Investing can be a good way to grow wealth over the long term and offers the potential for higher returns compared to a typical checking or savings account," says Jordan Gilberti, CFP and senior lead planner at Facet.
Should I pull my money out of the stock market? ›
Key Takeaways. While holding or moving to cash might feel good mentally and help avoid short-term stock market volatility, it is unlikely to be wise over the long term. Once you cash out a stock that's dropped in price, you move from a paper loss to an actual loss.
What is the economy prediction for 2024? ›
Global growth is projected to be in line with the April 2024 World Economic Outlook (WEO) forecast, at 3.2 percent in 2024 and 3.3 percent in 2025. Services inflation is holding up progress on disinflation, which is complicating monetary policy normalization.
What stock does The Motley Fool recommend in 2024? ›
The Motley Fool recommends Nu Holdings.
Who is better than Motley Fool? ›
The best stock advice websites include Motley Fool Stock Advisor, Seeking Alpha, and Moby. These platforms offer in-depth stock analysis and investing research to help you make informed decisions.
Which is better Zacks or Motley Fool? ›
The Motley Fool is more narrow and focuses on recommendations from its team of analysts, while Zacks' recommendations are culled from analysts across Wall Street. The Motley Fool also focuses on long-term buy-and-hold strategies in next-gen companies, centering value.
What is the 4 rule Motley Fool? ›
The 4% rule assumes your investment portfolio contains about 60% stocks and 40% bonds. It also assumes you'll keep your spending level throughout retirement.
If you want an exciting stock picking service that helps you build a portfolio of 10 or more stocks, The Motley Fool has you covered. Morningstar is the right choice for those who want a broader and more measured approach to picking their own investments.
What are the 5 AI stocks Motley Fool recommends? ›
The Motley Fool has positions in and recommends Amazon, Baidu, Meta Platforms, and Nvidia. The Motley Fool recommends Alibaba Group and Intel and recommends the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel.
Will the stock market correct in 2024? ›
Anthony Denier, CEO of the trading platform Webull, says he believes the stock market will ultimately post a positive return in 2024 as investors anticipate interest rate cuts by the Fed. However, he adds, we probably won't see as big of a rally as we did in 2023.
What is the market forecast for 2024? ›
Overall, Yardeni Research forecasts S&P 500 operating earnings at $250 in 2024, up 12% vs 2023. He puts them at $270 in 2025 (up 8%) and $300 in 2026 (up 11.1%). These figures compare with analysts' consensus forecasts of $244.70 in 2024, $279.70 in 2025 and $314.80 in 2026.
Is 7% return on investment realistic? ›
Tack on things like fees and taxes, and even 7% is probably a relatively high long-term return assumption for a portfolio, especially based on market forecasts today. Had you been invested in a balanced portfolio, your return after considering volatility and inflation would have been closer to 5%.
Will there be a recession in 2024? ›
Global recession outlook
There is now a 35% chance that the global economy will enter a recession by the end of 2024, and a 45% chance that it will do so by the end of 2025.
What will the stock market be like in 2025? ›
Analysts are predicting that profits for the S&P 500 will rise more than 15% in 2025, up from their 12.8% forecast at the start of this year and a hotter pace than 2024's expected earnings growth of 10.7%.
What is the stock market prediction for the next 5 years? ›
The updated Dow Jones price prediction for the next 5 years is for the index to trade around 40,600 points. Long Forecast predicts Dow Jones to trade above 40,000 points in the second half of 2024 and and advance up to 44,000 points by the end of the year.
Where will the S&P 500 be at the end of 2024? ›
The benchmark S&P 500 (. SPX) , opens new tab will end 2024 at 5,600 points, according to the median forecast of 41 equity strategists, analysts, brokers and portfolio managers collected Aug. 8-20.
