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With 2024 not even halfway over yet, it's no wonder traders are popping out their champagne glasses.
U.S. stocks have been hitting new all-time highs this year. The S&P 500 has surpassed its own record high 31 times since January, which means it's hitting a new all-time high roughly every four trading days.
Investors ignored high interest rates and inflation, a chaotic political and global situation, and general economic uncertainty as markets got off to the best start on record heading into an election year.
what's happening: Presidential election years are typically good for stocks.
According to LPL Financial, the S&P 500 index alone has generated an average return of 7% in presidential election years since 1952. If you restrict this to election years when the incumbent president is up for reelection, the average jumps to 12.2%.
The indexes are already up much more than their average gains this year: The S&P 500 is up 14.6% so far this year, the best start to an election year on record, according to Goldman Sachs, and is up nearly 31% from its October 2023 low. 4,117 points.
So why is this election cycle different from previous ones?
When a sitting president seeks reelection, profits are typically greater because investors are likely craving stability, and this election marks the first time since 1892 that candidates from both major parties will be in the White House, said Ed Clissold, head of U.S. strategist at Ned Davis Research.
If one incumbent runs for office, uncertainty is reduced, but if two incumbents run for office, Really Uncertainty will decrease, which could bring forward the typical surge in relief that follows elections at the end of the year, Clissold said.
Reasons to celebrate: Stock prices not only go up, they rarely go down either.
Goldman Sachs' Scott Rabner wrote in a recent client note that it has been 333 days since the S&P 500 posted a drop of 2% or more, the longest such streak since February 2018. He wrote that the outlook for the second half of the year remains bright, with a strong first half likely to lead to a “very strong” second half as well.
“The market's impressive rally continues but has been notable not just for its strength but also its stability,” Mark Hackett, head of investment research at Nationwide, wrote in a note on Friday.[T]There is no reason why the steady rise cannot continue, especially with the seasonal tailwinds of elections looming.”
Last week's gains were broad-based, easing investor concerns that the recent rally was concentrated in a few big stocks, including tech darling Nvidia, which has risen more than 155% so far this year.
An equally-weighted version of the S&P 500 rose 1.12%, while the small-cap Russell 2000 added 0.79%, while the tech-heavy Nasdaq was flat for the week.
The sustained rally has some analysts raising their year-end targets for the S&P 500.
Scott Kronert, head of U.S. equity strategy research at Citigroup, raised his year-end price target to 5,600 from 5,100 last week.
Analysts at Goldman Sachs, Barclays, Deutsche Bank and UBS also raised their forecasts for the broader index.
Yes, but: Market volatility in election years tends to increase in October, and there are several months left in this cycle that could provide some surprises.
On Thursday, CNN will air a debate between President Joe Biden and former President Donald Trump, “which will have plenty of room for big headlines and will determine whether the candidates gain momentum or fall back,” Deutsche Bank's Jim Reed wrote.
Investors may become complacent and start taking the current bull market for granted.
“The longer optimism persists, the greater the risk it will turn into complacency and make markets vulnerable to the next bit of negative news,” said Clissold of Ned Davis Research.
“The fall pullback coincides well with the potential for earnings downturn, make-or-break decisions from the Fed and election uncertainty. The risk is that one or more of these factors persist for longer, causing the pullback to be even larger,” he said.
Global perspective: The U.S. isn't the only country looming with elections. France and the U.K. also have elections coming up in the coming weeks. While polls suggest the center-left opposition Labour party will win handily in Britain on July 4, the situation in France is much more uncertain, sending markets into a tailspin.
French President Emmanuel Macron has called for early parliamentary elections following his centre-right Renaissance party's crushing defeat to the far-right opposition in the European Parliament elections.
The first round of the French elections will take place on June 30th, the second round on July 7th.
“Political uncertainty is a headwind for both sentiment (as reflected in financial markets) in the near term and now economic activity,” Katie Nixon, chief investment officer at Northern Trust Wealth Management, wrote about the upcoming election. “We expect volatility in European stock and bond markets through July.”
Alaska Airlines and its 7,000-member flight attendant union reached a tentative labor agreement late Friday, concluding talks that have lasted more than a year and a half, my colleague Chris Isidore reports.
Terms of the deal have not been made public, but the union is calling it a “record contract.”
Any agreement is likely to include significant wage increases, a common demand across the airline industry and also sought by union members who have not received a pay increase for years.
In April, the union announced it was seeking wage increases for its members of between 43 and 56 percent until 2026, depending on their years of service. The increases will include back pay for the previous year and a half of work done under the terms of the previous contract.
In February, Alaska Airlines flight attendants joined American, United and Southwest in an unprecedented coordinated picketing campaign demanding a new contract.
Since then, Southwest Airlines flight attendants have reached an agreement that includes an immediate 22.3% pay increase effective May 1 and $364 million in retroactive wage payments.
Meanwhile, flight attendants at American Airlines and United Airlines are still seeking new contracts. American Airlines flight attendants are seeking a lifting of restrictions to allow them to strike, but even if granted, they would be subject to a cooling-off period of several months before they could do so under rail labor law.
Apple is banking on upcoming AI features to boost iPhone sales, especially in China, where demand is sluggish.
But there's a problem, as my CNN colleague Samantha Murphy Kelly reports: ChatGPT, which will soon be integrated into Siri, is banned in China.
During a presentation earlier this month, Apple (AAPL) unveiled a unique technology called Apple Intelligence that promises to bring exciting new AI to the company. It's adding features, announcing a partnership with OpenAI, and will also make limited use of its much-talked-about ChatGPT tool (ChatGPT will step in if Siri is up and needs further assistance answering a query).
The move shows how Apple is trying to quickly adopt the latest hot technology at a time when tech rivals such as Microsoft, Google, Meta and Samsung have already established their dominance in AI. The deal with OpenAI could help Apple close that gap.
But China was one of the first countries in the world to regulate the generative AI technology that powers these popular services. In August, the Cyberspace Administration of China, the country's largest internet watchdog, released new guidelines for the industry, requiring companies to get approval before deploying them. As of March, the agency had approved more than 100 AI models, all of them from Chinese companies.
Apple is looking for a Chinese AI company to partner with ahead of the iPhone's planned September launch, but has not yet reached an agreement, The Wall Street Journal reported on Thursday.
Apple did not respond to a request for comment.
The urgent search for a partner comes as Apple's smartphone sales plummeted 10% in the first quarter of this year, according to market researcher IDC, driven in large part by a sharp decline in iPhone sales in China, where nationalism, the recession and increased competition have also hurt sales and the company has lost momentum there, its second-largest market.
