August 2024 S&P 500 Outlook: What Lies Ahead?
Investopedia is partnering with CMT Association on this newsletter. Â The contents of this newsletter are for informational and educational purposes only, however, and do not constitute investing advice. The guest authors, which may sell research to investors, and may trade or hold positions in securities mentioned herein do not represent the views of CMT Association or Investopedia. Please consult a financial advisor for investment recommendations and services.
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.
Check out our webcast on Three Steps to Every Signal.
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.
Our latest webcast is now available:Â Small Caps, Big Dreams: The Great rotation of 2024
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!
—-
Originally posted 6th August 2024
Disclosure: Investopedia
Investopedia.com: The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described on our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy. This information is intended for US residents only.
Disclosure: Interactive Brokers
Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from Investopedia and is being posted with its permission. The views expressed in this material are solely those of the author and/or Investopedia and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Disclosure: ETFs
Any discussion or mention of an ETF is not to be construed as recommendation, promotion or solicitation. All investors should review and consider associated investment risks, charges and expenses of the investment company or fund prior to investing. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
