The S&P 500 (SNPINDEX: ^GSPC) is enjoying a banner year. It topped 5,800 for the first time ever earlier in October. After a slight pullback, the widely followed index resumed its record-setting ways at the end of last week.
How will the S&P 500 finish the year after recently hitting an all-time high? Here’s what history shows.
Image source: Getty Images.
I looked at the S&P 500’s performance going back to 1950. The index set an all-time high during October in 27 of the 74 years. I should note that the S&P 500 didn’t exist in its current form during several of those years. While an earlier version of the S&P 500 has been around since 1923, the index didn’t include 500 companies until 1957.
Regardless of how many companies were in the index, history reveals an encouraging track record when the S&P 500 reached a record high in October. In 16 of the 27 years when this happened, the index finished the year even higher. What’s especially impressive is that in half of those cases, the S&P’s momentum continued without much of a hiccup.
For example, way back in 1954, the S&P 500 set an all-time high in early October. After a slight pullback, the index resumed its upward trend and finished the year significantly higher.
We don’t have to go back decades to see this type of sustained momentum, though. As recently as 2019, the S&P 500 exhibited a similar pattern with a record high in October followed by steady gains throughout the final two months of the year.
However, history doesn’t give investors enough reason to be overly confident about a rousing finish to 2024. In more than 40% of the years with a record high in October, the S&P 500 gave up some of those gains by year-end.
There’s a silver lining with this bad news, though. In 74 years, the S&P has never reached an all-time high in October and then plunged at the end of the year without any rebound. Investors received a big scare in 1979 with the index sinking like a brick after peaking in early October. However, it soon bounced back to recover most of the previous gains.
Investors have seen plenty of late-year turbulence after a record-setting October. Most of the time, though, the index didn’t decline too much from its previous high. The most recent example of this was in 2007 when the S&P 500 ended the year down roughly 6% from its October peak.
If you read the prospects for a top S&P 500 index fund such as the Vanguard S&P 500 ETF, you’ll see language that says something to the effect that past performance isn’t necessarily indicative of future performance. Such statements are correct, but do they mean that historical track records are unimportant? Not at all.
However, I think some aspects of historical performance are more important than others. And there’s another historical track record of the S&P 500 that investors should especially focus on, in my view. The following chart tells at least part of the story.
S&P 500 10 Year Return data by YCharts
Over a rolling 10-year period, the S&P 500 nearly always delivers positive gains. The above chart only goes back to 2000, but if we look all the way back to 1926 there have only been three periods when the rolling 10-year return for the S&P was negative.
I don’t know if the S&P 500 will keep rising during the last two months of 2024. However, I’m quite confident that it will perform well over longer periods of 10 years or more. And some S&P 500 stocks will deliver much higher gains. When you focus on the long term, history should be on your side.
Before you buy stock in S&P 500 Index, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and S&P 500 Index wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $880,670!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of October 21, 2024
Keith Speights has positions in 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.
—
Blog powered by G6
Disclaimer! A guest author has made this post. G6 has not checked the post. its content and attachments and under no circumstances will G6 be held responsible or liable in any way for any claims, damages, losses, expenses, costs or liabilities whatsoever (including, without limitation, any direct or indirect damages for loss of profits, business interruption or loss of information) resulting or arising directly or indirectly from your use of or inability to use this website or any websites linked to it, or from your reliance on the information and material on this website, even if the G6 has been advised of the possibility of such damages in advance.
For any inquiries, please contact [email protected]
