What should investors expect in the stock market in light of the 2024 solar eclipse?
Susan Tompor, Detroit Free Press
Updated 6 min read
Investors clearly can get stars in their eyes when it comes to dreaming that they've found the next hot stock pick, super-charged cryptocurrency or, yes, even a rare Pokémon card to buy them that Bugatti.
But what happens with an eclipse?
For fun, and believe me it's clearly for fun, I asked a longtime source on Wall Street what kind of returns the Dow Jones Industrial Average saw in years when there was a total solar eclipse in the continental United States.
The much-anticipated eclipse April 8 will cross a swath of the United States, including a small sliver of southeast Michigan. The total phase of the solar eclipse will not be visible in New York City, home of Wall Street, but a partial solar eclipse is expected. The I LOVE NY tourism arm is promoting "Come for the Eclipse, Stay for New York."
A map showing where the Moon’s shadow will cross the U.S. during the 2023 annular solar eclipse (Oct. 24) and 2024 total solar eclipse (April 8)
Sam Stovall, chief investment strategist for CFRA Research, frequently compiles historical lists of stock performance during presidential terms or election years. He naturally was the first person I contacted to navigate the numbers when I thought about what happens when you mix stocks and eclipses.
The good news — if you're lifting your eyes to the heavens and wearing the appropriate ISO 12312-2 international standard solar eclipse eyewear — is that the Dow has tended to do pretty well in total eclipse years in the continental United States.
The Dow posted a positive year in 10 out of 13 total solar eclipse years on the list from 1900 through 2017.
The most breathtaking year for gains in that group was 1954 when the Dow rose 44%. Three other years had gains of 25% or higher: Up 30% in 1925, up 26.6% in 1945, and up 25.1% in 2017.
Oh, a few years were losers, including some meltdowns — 1923, 1930 and 1932.
The worst year was 1930 when the Dow darkened the economic landscape early in the Great Depression by tumbling 33.8%. The Dow was down 23.1% in 1932, also during the Great Depression, and fell 3.3% in 1923.
Other years were so-so, like 1970. Millions watched the eclipse in clear skies in 1970, called the "Eclipse of the Century" by NASA, with an "eerie twilight" being cast among the skyscrapers, according to the New York Times.
In 1970, the Dow was up 4.8% and then up 4.2% in 1979. Back in February 1979, the eclipse was visible from only the Pacific Northwest and the Dow was up 4.2%.
Wall Street has had quite a show already
The Dow, of course, has been offering its own spectacular show for much of 2024.
We've edged super close to 40,000 on the Dow. The blue chip index traded as high as 39,889.05 points on March 21. It closed at a record of 39,807.37 points on March 28. The Dow was up 5.6% through March 28.
Stovall said his outlook remains positive for 2024. "I think we end up with one, maybe two, declines of 5% or more during the year," he said, "but end up with a double-digit year-over-year price increase."
This year through March 28, he said, the S&P 500 index set 22 new all-time highs. That is the sixth-greatest first-quarter count since World War II.
The S&P index rose 10.2%, which is the 11th best first quarter showing since 1945.
"The S&P 500 is not alone in its surge through uncharted territory," Stovall said. New highs also were set by the Nasdaq index and the Dow industrial average.
Before a pullback in early April, the Dow closed March being less than 200 points away from setting a new all-time high above the 40,000 level. But the Dow closed at 38,596.98 points on Thursday after a particularly rough start for April. Stocks stumbled Thursday, as debate heated up over how many rate cuts could be ahead in 2024.
Yet some remained hopeful overall.
"History tends to confirm that the market typically takes a breather after eclipsing millennium milestones," Stovall wrote in his report.
Ever since the Dow industrial average crossed the 1,000 mark in 1972, Stovall wrote, the stock index has risen an additional 2.6% over a 25-day period before slipping into a decline averaging 6.2%.
The Dow Jones Industrial Average could, he told me, advance 2.6% beyond the 40,000 level before falling into a decline that runs in the 5% to 10% range.
"We may be in the beginning of a meaningful decline now," Stovall said Tuesday. Even so, Stovall said history indicates that 2024 should end with a double-digit, full-year gain.
Are clouds in the forecast?
We all worry about cloudy skies when it comes to an eclipse or an investment horizon.
David Sowerby, managing director and portfolio manager for Ancora Advisors in Bloomfield Hills, said the odds of some correction are likely in 2024 given the mounting list of global politics and uncertainty. The average intra year stock market decline — from a market peak to a trough in a year — is 14%, he noted, making a correction quite normal in a calendar year.
The S&P 500 index's 10% gain in the first quarter, he said, doesn't mean that stocks steadily will drop from here. Instead, he said, it continues to be possible that there's another 4% to 6% upside for the S&P 500 index for the rest of 2024.
General Motors and Stellantis both outperformed the S&P 500 in the first quarter. GM stock was up 26.25% and Stellantis stock was up 21.36%. Ford Motor, by contrast, was up 8.94% in the first quarter.
Right now, the Dow is focused more on what the Federal Reserve will do next than on celestial celebrations.
Many economists had expected that the Fed would cut rates three times, a quarter point each time — totaling 75 basis points — in 2024 with a first rate cut expected to be announced after its June meeting.
But stocks took a turn down in early April, as more investors speculated that the Fed might only cut rates twice in 2024, particularly in light of a strong jobs report for March. The U.S. unemployment rate fell to 3.8% in March, down from 3.9% in February, according to a Labor Department report Friday.
"The strength we are seeing is welcome but will further delay the Federal Reserve when it comes to rate cuts," wrote Diane Swonk, chief economist for KPMG US on Friday.
"We now expect the Fed to cut by two instead of three times this year, starting in the second half," Swonk wrote.
Mark Zandi, chief economist for Moody's, said Friday that he still expects three rate cuts in 2024 in June, September and December. The key driver, he said, will be what happens with inflation statistics in the next two months. He expects that inflation will continue to moderate and give the Fed room to cut rates.
“I don’t think the employment numbers are nearly as important,” he said, given the strong labor supply.
Hardy corporate profits, only very limited concerns of a recession ahead in 2024, and big bullish sentiment all had driven stocks higher earlier in the year.
The overall vibes have been good, just like those for the eclipse. Now, we'll see what happens next.
