August 2024 S&P 500 Outlook: What Lies Ahead?
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August 2024 S&P 500 Outlook: What Lies Ahead?
It’s time again for a choose-your-own-adventure style analysis of the S&P 500!
The S&P and Nasdaq have experienced one of their worst weeks in 2024. What happens next? Let’s break it down with four probabilistic scenarios — an exercise I recommend doing quarterly to stay ahead of market shifts.
Here’s a look back at what happened in late April when we last did this exercise. We considered four scenarios: super bullish, mildly bullish, mildly bearish, and very bearish. Interestingly, scenario one, the super bullish, perfectly matched the S&P 500 movements. Growth returned to a leadership role, with the strength in the Magnificent Seven stocks leading to a rise in the major benchmarks. Now, will something similar happen in August? Let’s examine.
Scenario One: The Super Bullish
In this scenario, much like what we saw from late April to early June, things start dire but ultimately head upward. The Magnificent Seven stocks, like Meta, Alphabet, Amazon, Apple, and Microsoft, would need to reinitiate their trends. Dip buying would have to come into play, especially for semiconductors like Nvidia and AMD. Technically, this could mean a new all-time high in August and talk of the S&P 500 surpassing 6000 by year-end.
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Scenario Two: The Mildly Bullish
This scenario suggests we don’t lose more ground or gain significant levels. Mega-cap names like Amazon and Alphabet hold their ground but don’t return to leadership roles. Other sectors, such as industrials, materials, and financials, do the heavy lifting. The market would remain in a choppy sideways range between 5400 and 5650.
Scenario Three: The Mildly Bearish
Here, the pullback isn’t over, and we see an eight to ten percent correction down to the 5100-5200 range. The Fibonacci support level holds, and while sectors like energy and materials might do well, big tech and consumer discretionary names struggle, but it’s not a full-on risk-off environment.
Scenario Four: The Super Bearish
This involves a severe market deterioration. The downtrend accelerates, gaps down continue, and there’s no substantial buying of weakness. Investors sell strength, pushing markets lower and triggering more selling — a waterfall decline. This could lead us to break below the 200-day moving average, trending towards 4700.
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Think about these scenarios and the macroeconomic factors at play, especially with the Fed’s upcoming decisions. A rate cut could provide upside, but inflation concerns could bring bearish actions. Also, remember the seasonal patterns. Historically, August and September aren’t the best months for the market!
Which scenario do you see as the most likely? Watch the video, then drop a comment and let me know!
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Originally posted 6th August 2024
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