Happy Old & New Years!

The S&P 500 rose 24.2% last year after falling 19.4% during 2022 (chart). Since the start of the data in 1928, years with gains of over 20% were followed by years of 5.9% gains on average. Excluding recession years, the second-year gains averaged 9.7%. Losses during recession years averaged 10.1%. Down years for the market are more likely than not to be associated with recessions.

We think that the odds of a recession are still relatively low in 2024. We raised the odds of a recession before the end of 2024 from 30% to 35% in our October 23, 2023 Morning Briefing because of our concerns about geopolitical turmoil as a result of the Gaza War. That remains our current assessment.