The overwhelming view at the Street is that the S&P 500 (SPX) underwent a cyclical correction in 2022 within a longer-term secular bull market. In 2023, it transitioned to a cyclical bull market within the same secular bull market, according to BofA technical analysts.
As of entering 2024, the S&P 500 is positioned in mid-cycle cyclical and secular uptrends, analysts said in a note.
Various factors, including scenario analysis, election year seasonality, a significant base from 2022-2023, and the roadmap of the secular bull market, indicate potential longevity for the S&P 500 at 5000+ levels in 2024.
“The SPX was up 24.2% in 2023 after dropping 19.4% in 2022. Investors want to know: Can the SPX make it two up years in row and rally again in 2024? The answer is yes,” analysts said.
“The SPX is up 86% of the time on an average return of 13% in years following an up year (2023) after a down year (2022).”
This indicator sees the SPX trading at 5300-5400 at the end of 2024.
“The 2022-2023 cup and handle and our secular bull market roadmap charts also suggest that the SPX spends some time above 5000 in 2024.”
The significant base, resembling a cup and handle pattern, points to potential future targets at 5200 and 5600, with a strong foundation above the 4600 level, according to BofA.
The rising 40-week moving average (MA) around 4400 and the ascending 200-week MA around 4000 serve as indicators of the mid-cycle cyclical and secular bullish trends.
Given that 2024 is an election year, analysts note that the Presidential Cycle Year 4 has solid returns. However, they also noted that “the SPX can struggle in early Year 4 given lackluster January through May returns in Presidential Election years.”
Overall, the SPX tends to show solid returns in Presidential election years.