Bank of America stated that 2024 is a crucial year for the stock market as the current presidential cycle enters its fourth year.
Previous data shows that the fourth year of the presidency was the second strongest year for the stock market. According to data since 1928, the median and average returns of the S&P 500 index in history were 10.7% and 7.5%, respectively. Only the third year of the presidential term is stronger than this.
It is reported that one idea behind the steady performance of the fourth year of the US presidency is that the current president will attempt to provide the economy with the final stimulus through fiscal spending to increase the chances of re-election.
Bank of America pointed out that although historically, the stock market has brought stable returns in the fourth year of the presidency, with a probability of a 75% increase, such returns are quite unstable and are expected to only appear in the second half of this year.
"The average monthly return of the S&P 500 index in the fourth year of the presidential cycle shows mediocre performance from January to May, rebounding in the summer of June August, falling before the September October election, and rebounding after the November December election," said Stephen Suttmeier, a technology strategist at Bank of America, in his latest report
He further explained that the strongest month of the year is often August, with an average increase of slightly over 3% and a probability of 71%. At the same time, as the uncertainty surrounding the presidential election recedes, December is usually the most likely month for the stock market to soar, with a probability of 83%. Finally, May is often the weakest month of the year, with an average decline of 1.1%.
Suttmeier said that although there may be fluctuations in the first few months of 2024, overall he holds a constructive attitude towards stock returns and believes that "a tactical pullback in early 2024 should precede strong growth in 2024.".