Mark Hackett, chief of research at US investment firm Nationwide, says that there are several indications that the market is more stable this year than in 2022, when stocks sold off in the latter half of the year.
Since 1980, whenever S&P 500 gained more than 6% going into August, the rest of the year has been positive every year except 1987, with an average gain of 5.4%, according to Hackett.
The broad-based index finished this July up over 19% for the year, versus a 13% decrease during the same period last year.
"There's a lot to like about where we are," said Hackett.
The market has been less reactive during recent Federal Reserve policy meeting days, he said. The S&P 500 has been negative for only two of eight completed months this year. CNN's Fear & Greed index, which looks at seven indicators of market sentiment, is at 56, or a "Greed" reading, compared to a "Fear" reading of 40 a year earlier.
While stocks fell roughly 2% in August, they still outperformed their 4% loss during the same month last year. Stocks also finished the last week of August with a powerful rally. The Dow Jones Industrial Average and Nasdaq Composite indexes saw their best weekly performance since July, while the S&P 500 notched its best gain since June.
Still, there are challenges ahead for the stock market.
Oil prices on Wednesday hit their highest level in nine months, after Saudi Arabia and Russia, the world's biggest crude exporters, said they would extend output cuts through at least the end of the year.
Some economists say that prolonged, elevated energy prices could push up inflation for services such as freight. Prolonged inflation has the potential to extend the Federal Reserve's fight to tamp down prices and in turn put more pressure on the US economy.
That could also put more strain on consumers' wallets. Hackett said that while consumer strength has stayed resilient, which has helped power the economy, he's monitoring whether it stays that way.
He added that while he's cautiously optimistic that the market will stay strong through the end of the year, the rally's over-reliance on mega-cap tech stocks, such as Nvidia (up 222% this year) and Meta Platforms (up 148%), is a point of concern.
"At the end of the year, that's where we have to reassess our expectations," he said.
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