While some experts have dismissed the recent increase in stock prices as a temporary rebound, Detrick remains bullish and disagrees with them. He has consistently expressed positive views on stocks since mid-October when the S&P 500 hit its lowest point.
Detrick outlines the following three reasons to explain why he believes the stock market could continue to surprise investors and reach new record highs by the end of the year.
Why the Stock Market is Ready to Soar?
Getting back to record highs might not be far away for the S&P 500. Last week, the index traded above 4,400, which is only a few hundred points below its previous record high of 4,818 in January 2022. Currently, the index stands at 4,373, so it would need to climb by about 10% to set a new record.
Ryan Detrick, the chief market strategist at Carson Group, believes that stocks still have room to grow and reach new highs this year. He suggests that with some positive developments, stocks could easily gain the 8% needed to reach those highs.
Historically, there’s evidence to support the idea that a strong start to the year often leads to continued stock market strength in the second half. Detrick studied 22 instances since 1950 when the S&P 500 had risen at least 10% by the end of June. In those cases, the following six months saw a median gain of 10%, and stocks were higher 82% of the time.
Stock Market Breadth on the Rise
While big technology companies have been driving much of the S&P 500’s success this year, things are starting to shift as more individual stocks begin to rise.
This is actually a positive sign for the stock market and suggests that the ongoing rally could be more sustainable. A recent development supporting this is the record-breaking performance of the S&P 500’s Advance-Decline line.
The Advance-Decline line is a technical tool that measures how many individual stocks are participating in a market trend. Its recent breakout indicates that more individual stocks are joining the upward movement. According to Detrick, this is another encouraging signal that the trend of the stock market is indeed heading higher.
Usually, during major market peaks, stock prices rise while market breadth declines. However, this time, both stock prices and market breadth are on the rise. This gives Detrick confidence that the stock market rally can continue.
“We anticipate that both stock prices and market breadth will eventually reach new highs, as they have done many times in the past. There’s a good chance that it will happen this year,” Detrick expressed with optimism.
Unstoppable Stocks: Onward and Upward!
Even when the stock market has experienced declines this year, more often than not, it bounces back the very next day, showing its resilience.
“They just refuse to go down,” remarked Detrick.
In fact, Detrick discovered that after a down day, stocks tend to rise by an average of 0.27%. This is considered one of the strongest returns for the S&P 500 since 1928.
“I see this as another compelling reason to maintain a positive outlook for 2023,” affirmed Detrick.
Despite occasional setbacks, the stock market has consistently demonstrated its ability to recover and generate positive returns. This resilience gives investors confidence in the potential for continued growth and success in the coming year.