Occasional Daily Thoughts

William Shakespeare famously quipped “What Is Past Is Prologue.”? Success in most endeavors, including investment markets, requires an understanding of historical antecedents and learning from their implications for the future. Many know the phrase “Those who fail to learn from history are destined to repeat it.”? We prefer to apply what has come before to improve the probability of success and reduce the chances of failure. “This time is different” remain the four most dangerous words in investing. History, through statistical data, may improve opportunity as well as help to avoid disaster.

In early December, we shared the below graphic illustrating our expectation of a higher market by early June 2024:

We said:

LRG Wealth Advisors’ latest analysis shows the S&P 500’s momentum as unusually high historically, with the 20-day rate of change at the 99th percentile of readings since 1950. This indicator has previously led to meaningful market advances over the next 6 months. We anticipate supportive conditions for prices ahead.

Additionally, we highlighted the following chart and its meaning:

We said:

Regular readers of our research content know that we respect momentum surges as meaningful indicators of future strength. When Net 20-Day Highs [20-Day Highs minus 20-Day Lows] for the S&P 500 Index have exceeded 50% in the past, significant forward 6-month market rallies have a greater propensity to occur. Such a reading occurred on Friday, December 1, 2023, and again on Monday, December 4, 2023!

As we check in on the progress of the markets after six weeks, the markets appear to track in line with prior momentum and breadth surges. We acknowledge that the specter of the presidential election can make the late winter and early spring perilous; however, until controverting evidence forces us to re-evaluate our position, we will remain bullish through May 2024.

We will keep you posted. Take good care.