S&P 500: 5 Reasons to Still Expect a Yearend Rally
Against those that keep predicting a doomsday scenario for the market, I maintain a positive outlook for the remainder of the year, supported by various compelling reasons. While the market is ultimately decisive and past performance does not guarantee future result, there are 5 noteworthy factors that investors should pay attention to now.
Let's review them:
1. The Zweig Breadth Thrust Indicator (ZBT) typically signals an approaching interesting point in the markets when transitioning from below 0.40 to above 0.615 within a maximum of 10 days. Such is the setup now.
In fact, the historical S&P 500 figures for the ZBT above the 0.6 threshold are intriguing:
2. Earnings contribute to sustained stock growth. Initially anticipated to be relatively low, Q3 projections now suggest a +6% rise in S&P 500 earnings, signaling a much stronger economy than many predicted.
3. Over the last 44 years (since 1980), the S&P 500 experienced declines of -10% or more in 22 years. In 12 of those years, it subsequently rose by an average of +17%.
4. In the past 95 years, there were only 9 years where the S&P 500 closed negatively in August, September, and October. Subsequent months consistently witnessed market increases (except for one year).
5. Examining the last 10 Fed rate hikes, particularly the final hike concluding the cycle, the S&P 500 rose in 8 instances a year later, averaging a +14.3% increase. The last rate hike on July 26 saw the central bank choosing to keep rates unchanged in both the September 20 and November 1 meetings.
The market is nearly certain this was the last rate hike. If confirmed, the historically bullish period extends until six months after the onset of rate cuts.
Despite the seemingly optimistic outlook, being
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