U.S. stock exchange traded funds have enjoyed a strong rebound for the year so far, and if history has any say in it, the bullish market momentum could continue through the year’s end.

The S&P 500, along with related ETFs that track the benchmark like the SPDR S&P 500 ETF (NYSEARCA: SPY), iShares Core S&P 500 ETF (NYSEARCA: IVV) and Vanguard 500 Index (NYSEARCA: VOO), has increased more than 20% in 2019, and the forward momentum could push into 2020.

In previous years when the S&P 500 gained 20% or more through October, such as what happened this time around, the average return through the rest of the year is over 6%, CNBC reports. Since the 1950s, Canaccord Genuity found that this has happened in the markets seven times, with a median return of 5.92% and all seven times led to gains the rest of the year.

Hitting All-Time Records

The U.S. markets have been hitting new all-time records. The Dow Jones Industrial Average recently hit a record high on Monday a week after the S&P 500 touched its highest level ever. The equity market has found support from increased investor confidence as the U.S. and China move toward a trade deal, the Federal Reserve cuts interest rates and Corporate America reported better-than-expected earnings.

Canaccord Genuity also argued that historically low inflation gives the Fed more room to aggressively cut rates. Furthermore, economic activity is still strong and could drive an earnings-induced rally ahead.

“Over the long-term, the equity market is most closely correlated to the direction of earnings. The continued positive trajectory of EPS and low inflation should cause a continued multiple expansion,” Canaccord Genuity analyst Tony Dwyer said in a note to clients.

“The message is clear — use any pullback as an opportunity to add exposure,” Dwyer added.

For more information on the ETF industry, visit our current affairs category.

Subscribe to our free daily newsletters!
Please enter your email address to subscribe to ETF Trends' newsletters featuring latest news and educational events.