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What to Expect from the S&P 500 in the coming Years

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Analysis of S&P 500 for 2024 outlook, tech indicators, historical patterns, and more.

Description: A graph illustrating the performance of the S&P 500 over time.

The fourth quarter earnings season for the S&P 500 is not off to a strong start. To date, the number and magnitude of positive earnings surprises have been significantly lower than the long-term average. As the market digests the current earnings news, investors are also looking ahead to what the S&P 500 might look like in the coming years.

Overall, the S&P 500 is “in no-mans land,” stuck between resistance at 4100 and support at 3,700 support, “all within an ongoing downtrend,” according to a recent report from Macro Ops. This means that the market is likely to remain range-bound for the foreseeable future.

Several tech indicators are pointing in a bullish direction for stocks, says Macro Ops Alexander Barrow. Specifically, the Relative Strength Index (RSI) is suggesting that the market is oversold, while the Moving Average Convergence Divergence (MACD) is showing a positive divergence. These indicators suggest that the market could be due for a rally.

If you’re feeling discouraged about the stock market right now, you’re not alone. It’s been a hard year for investors, with the S&P 500, the Dow Jones Industrial Average and the Nasdaq Composite all down significantly in 2020.

This year’s stock-market rally has pushed the S&P 500 to valuation levels that make it difficult for the index to climb much higher based on traditional valuation metrics. According to a recent report from CNBC Pro, the S&P 500 is now trading at a price-to-earnings ratio of 23.5, which is significantly higher than its long-term average of 16.5.

I anticipate the S&P 500 closing near the 2685 level at the close of 2023. Historical patterns suggest that the market has shifted to a cyclical pattern of up years and down years, so I expect the index to be higher at the end of 2023 than it is today.

Consecutive down years are rare for US stocks, so after this year’s drop, there’s only a low probability they will decline again in 2023. However, investors should be aware that global events, such as the coronavirus pandemic, could still cause the market to dip.

I expect S&P 500 2024 forward earnings to be $237.2, which in my opinion, should fetch 17.5X, a multiple more in line with 3.5-4%, the historical median P/E of the S&P 500. This implies a potential upside of approximately 8% from current levels.

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