Investor’s Guide: Lunar New Year 2024 Insights on Stock Market Performance and Gold Trends

Tom Lee from Fundstrat points out that the U.S. stock market has historically flourished during the Years of the Dragon, boasting an average gain of 12.7% since 1871. This historical trend indicates that the recent uptrend in the S&P 500, which has propelled it to the significant 5,000-point milestone, may have further room to grow.

Lee’s analysis suggests that by the end of 2024, the S&P 500 could potentially surge to 5,350 points, marking a projected 6.4% increase from its current level.

As we approach the onset of the Year of the Dragon on February 10, 2024, Lee also highlights the promising performance of small-cap stocks during this period. Over the years, small-cap stocks have tended to outshine the S&P 500, prevailing in 88% of instances since 1979.

Additionally, Lee draws attention to the current price-to-book ratio of the Russell 2000 index compared to the S&P 500, which mirrors conditions observed in 1999 when small-cap stocks outpaced their large-cap counterparts for the subsequent 12 years.

Anticipating a reversal in the trend of investor outflows from equities, Lee foresees positive inflows into the market in 2024. This shift could further bolster small-cap stocks and potentially broaden the market rally beyond the “Magnificent Seven” mega-cap growth and technology companies.

A more expansive rally could drive the S&P 500 towards the upper bounds of a projected range between 5,400 and 5,500 by the year’s end.

In addition to equities, the Year of the Dragon typically sees heightened demand for gold, particularly from China during the Lunar New Year vacation season. This tradition, combined with ongoing geopolitical tensions and robust central bank demand, sets a favorable backdrop for gold prices in 2024.