Why Stocks Could Rally 20% – Again – in 2024

Most investors never saw it coming...

2022 had inflicted an incredible amount of pain. Stocks and bonds fell in tandem. Nearly everyone expected the pain to continue in 2023.

The market tends to do the opposite of what everyone expects, though. And instead of falling further, stocks soared.

The market finished the year up 26%. A good chunk of those gains came in November and December. And the broad rally since late October points to more gains this year.

In fact, history shows the market could rally 20%-plus in 2024.

Let me explain...

A year of 20%-plus market gains might seem like an outlier. But it's more common than you'd think.

Excluding dividends, the market has posted 20%-plus annual gains 21 times since 1950. That means they happen more than a quarter of the time.

What's more surprising is that gains of 20%-plus happen more often than losses. Stocks have only fallen in 20 calendar years since 1950. If you include dividends, the number is even lower.

With that in mind, a gain of 20% or more this year isn't so crazy... especially when you look at the rally that ended 2023.

After bottoming in late October, stocks rallied 16.1% over the next seven weeks. That's the highest seven-week return since coming off the pandemic lows in 2020. Check it out...

Most folks would look at this rally and assume the market has overheated... and that a slowdown will surely come next.

History disagrees.

To see it, I examined every seven-week rally of 14% or more since 1950. We've only seen 33 similar setups over that time. And stocks kept soaring in almost every instance. Take a look...

Stocks have been a solid way to build wealth over the long term. Since 1950, the market has returned 7.9% per year. But you can do much better buying after setups like this one...

Similar rallies led to 7.1% gains in three months, 11% gains in six months, and 19.3% gains over the following year. That's multiples better than the buy-and-hold return for each time frame.

What's more, a year after these setups, stocks were higher 91% of the time. And the market was up by 20%-plus 55% of the time.

That means last year's incredible rally doesn't have to end anytime soon. Instead, it's likely to continue.

Another gain of 20% or more is possible this year. And that's why you should consider owning stocks in 2024.

Good investing,

Brett Eversole

Further Reading

Investor sentiment quickly shifted in late October... And stocks went from "oversold" to "overbought" levels as a result. That's usually a warning sign. But according to history, this sudden swing is an exception to the rule... Read more here.

Last year's correction spooked investors. But according to the market's "fear gauge," those fears are fading. And that bodes well for stocks in the new year... Learn more here.