Why the Market Will Keep Surprising Everyone but Us

By TradeSmith Research Team

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Why the Market Will Keep Surprising Everyone but Us

At the start of 2023, just when everyone decided a brutal recession was ahead, stocks screamed higher.

Yet heading into 2024, the crowd was not only bearish… they were sidelined even after staring at a 26% annual return in the S&P 500.

We thought differently. If you recall, one of our favorite stock studies hit last year during the depths of the bear market… reminding investors we should always remember to buy in November.

That call didn’t disappoint. Not only did markets perform well in the final two months of last year, with the S&P 500 ripping 12.9%, but stocks just capped off a bear-beating 14.48% climb through the first half of this year.

After such a mind-numbing, breakneck rally, you may be wondering if trimming some gains is a smart move.

It sure sounds like it makes sense…

But once you study history, you’ll learn that high momentum in the first half is NOT a reason to sell… just the opposite.

Today, we’ll dive into the current landscape of stocks. Then we’ll learn what typically comes in the back half of the year. Not only that, but we’ll also study similar high-velocity periods for clues as to what’s on the horizon.

Go ahead and hug a bear… they’ll need it after they chew through this hard-hitting evidence.

The S&P 500 Had Its Third-Best First Half Since 1999

It’s rare for markets to run 14% or more in the first half like they have in 2024.

In fact, this is the third-strongest first half for the S&P 500 since 1999.

The only recent times the market did better was:

  • 2019: first-half gain of 17.35%
  • 2023: first-half gain of 15.91%

The chart below singles out this year and the prior ultra-strong years of 2019 and 2023:


Given the sheer strength of this performance in 2024, I thought it’d be a great idea to show you how a 14.48% first half compares to decades of history.

Since 1979, the average first-half performance comes out to a gain of 5.13%. That puts this year’s outperformance at a whopping 182%:


History proves just how powerful and rare this year’s rally has been.

So it’s probably easy for most to assume this level of strength is sure to subside…

After all, the popular Wall Street adage is “buy the dip and sell the rip.”

But before you take your chips off the table, let’s dive further into history…

Taking the above analysis a step further, let’s take a closer look at those above-average years when stocks return more than 10% by July.

Turns out, that’s a rip you want to buy, not sell…

Check this out. From 1979 to 2023, the second half of the year averages a nice 4.66% return.

But even nicer is the final two quarters when the market jumps 10% or more in the first six months…

Whenever the S&P 500 is up over 10% in the first half, the second-half average return jumps to 6.16%:


Two halves make a whole… and when it comes to markets, two halves make a whole lot of gains when the first half is up big!

This is why it’s mission-critical to have cold, hard data at your disposal whenever rare market events occur.

The huge rally this year might have caught the crowd off guard. But not us… and not you, if you’ve been following along.

Do all you can to ignore the noise and follow the data and historical evidence.

That’s how you win!


Lucas Downey
Contributing Editor, TradeSmith Daily