Historical returns and pullbacks after strong first quarters

Market Perspective

March 28, 2024

What happened

The S&P 500 was up more than 10%, including dividends, in the first quarter. A common question for investors is what, if anything, has this meant for the rest of the year. 

Our take

Since 1950, we have seen 11 previous instances where the S&P 500 rose at least 10% in the first quarter. Following such periods, the S&P 500:

  • Was higher the next quarter 9 out of 11 times, with an average gain of 5%
  • Was higher the rest of the year 10 out of 11 times, with an average gain of 11%
  • The maximum pullback seen at any point the rest of the year, even while the market ultimately ended higher in 10 of 11 instances, averaged 11% (median = 6.9%) 

Bottom line

The historical data, which should only be used as a starting point, shows strong first quarter returns are typically a positive sign and tend to lead to further market gains by the end of the year. This is consistent with previous studies that we have shown that suggest strong price momentum tends to be a positive sign and a characteristic of bull markets. The data also suggests investors should be prepared for normal pullbacks along the way. This is consistent with our view that investors stay with the primary market trend, which is up, and look to pullbacks as opportunities.

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