The chart above highlights the top 10 years that are most correlated to 2023 based on their weekly return progression. As you can see, 1955 and 1985 are the closest comparisons, both with a correlation of 0.89. However, 1955 has the edge as it shows a “higher” Fed Funds Rate and no recession occurring.
Both years produced positive returns in the following year and, over all of the years surveyed, 60% had a positive return and only two produced recessions in the following year. The average return over all of the years shown is +5.9%.
Of course, there are many factors that come into play that aren’t necessarily captured in this chart; Earnings of Corporate America, Presidential election cycles, Global unrest, etc. However, with the exception of the Black Swan event that is unpredictable, 2024 should be a strong year for markets.
Earnings per share of Corporate America continue to come in positive, the S&P 500 has reached a record all-time high of 4,839.81, which is up +24% over the past year (very close to 1985 and 1955 Annual Returns in the chart above), low unemployment, and much to many people’s surprise, the US Dollar is thriving. But your local news won’t tell you any of this positive news!
The fundamentals of the economy are positive even though investor sentiment doesn’t reflect this. Your average investor remains timid, and they are likely to miss the train leaving the station.
There will be volatility mixed in along the way, but history and current fundamentals show that we are moving in a positive direction.
I am interested in your thoughts, comments, and questions!