Why This Could Be a Good Year for Stocks: Carson's Detrick

A key market indicator from the first quarter could signal a more promising year for stocks than many analysts expect, Carson Group Chief Market Strategist Ryan Detrick suggests.

“When the S&P 500 doesn’t close beneath the December low close in the first quarter, good things have tended to happen the rest of the year,” Detrick wrote in a blog posted Wednesday. “The opposite, of course, is when the December lows are [breached] in the first quarter.”

The S&P 500 did fall below its December 2021 low in the first quarter of 2022, and it was “one subtle clue that the odds of a dicey rest of ’22 had increased,” he wrote. “Given that stocks didn’t break their December low this year, this is one less worry for sure.”

Detrick considers the historical data conclusive.

Since 1950, stocks stayed above the December lows 36 times and broke the lows 37 times, he said. In the 36 times the December lows held, “the full year was up an incredible 34 times and up an average of 18.6%.”

The S&P 500 in the final three quarters was up 33 times and returned an average 11.1% when the December lows held, according to a chart Detrick provided.

When stocks fells below the low, the full-year return was negative 0.2% on average and was positive less than 49% of the time, he wrote.

Some of the worst stock market years — 1973, 1974, the tech bubble, 2008 and 2022 — came when the December lows were broken in the first quarter, Detrick noted.

“Anything could happen from here,” Detrick said, “but the truth is it would be quite abnormal to expect a massive bear market and a horrible year for stocks this year.”