There was a lot of optimism just before the new year, but that may have already been priced into 2023’s gains for the S&P 500. January is historically a slow month for the index, which should be enough to appease the bears if that trend persists.
“The first is last — when we’re talking about the calendar and the S&P 500,” wrote Keith Speights in The Motley Fool. “Since 2004, the major index has risen only half of the time during the first month of the year. That’s a lower rate than any other month.”
The index is up over 20% the past year, coming back after a 2022 bear run that hit both stocks and bonds. The capital markets are hoping that 2024 is an extension of the 2023 comeback with the expectation of Fed rate cuts ahead. For traders who want to save the bullishness for key months, January presents a unique bearish opportunity.
“Granted, the average returns for the S&P 500 during June and September have been lower than those in January,” Speights added. “Still, it’s indisputable that January has been one of the worst months for the S&P 500 over the last 20 years.”
That said, to profit on the downside in the short-term horizon, traders can use the Direxion Daily S&P 500 Bear 3X ETF (SPXS). Per its baseline fund description, SPXS seeks daily investment results equal to 300% of the inverse of the daily performance of the S&P 500 Index.
Bulls Thriving in Long Term
If history holds true and the index starts to pick up in February (especially if a rate cut happens in the early going of 2024), then bulls should thrive in the long term. That’s especially the case this year with a forthcoming presidential election. With history on its side once again, the S&P 500 should extend its rally from 2023.
“Despite histrionics, politics are a 2024 tailwind. Since 1925 (when accurate data start), the S&P 500 climbed in 83.3% of presidential election years,” a New York Post article stated, noting that average returns were 11.4% and even higher during election years when the index was in the green. “When positive, election years averaged 17.0%.”
When the index starts to exhibit signs of upside, traders can buy the dip and use the Direxion Daily S&P 500® Bull 3X Shares ETF (SPXL). Both SPXS and SPXL offer thrice the leverage, so only seasoned traders should use these products.
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