Wall Street could experience another solid quarter as stocks have made a strong start to the year. The S&P 500 Index posted its best first-quarter performance since 2019, up 10%, as stocks rode a wave of enthusiasm over the prospect of rate cuts coming later this year, as well as the potential of artificial intelligence to support businesses. profits. Nvidia, the poster child for the AI rally, grew more than 80% in the first quarter. The VanEck Semiconductor ETF (SMH) jumped nearly 30% in the period. Meanwhile, the Dow Jones Industrial Average is on the verge of reaching 40,000 for the first time ever. These gains have many investors deciding whether the rally can continue into the second quarter, or whether stocks will undergo some sort of consolidation – or even correction – in that period. Many stocks are triggering overbought signals. Some macroeconomic observers worry that pressure on consumers from higher interest rates for a longer period will soon be felt in the economy. Historically speaking, at least, it appears that the party may continue for a while longer. According to Ryan Detrick, chief market strategist at Carson Group, in 10 out of 11 cases where the S&P 500 posted a gain of 10% or more in the first quarter, the overall market index was higher for the remainder of the quarter. ‘year. Specifically, in the second quarter, the S&P 500 rose 9 out of 11 times, with an average gain of 2.7%. “We were in the very rare camp a year ago saying there would be no recession, this is probably a bull market,” Detrick told CNBC’s ” Squawk Box ” on Wednesday. “We’ve been in that camp ever since.” Significantly, two of the 10% first-quarter gains analyzed by Detrick occurred during election years, with the S&P 500 ending the year higher. In 1976, the S&P 500 rose 1.5% in the second quarter and jumped 4.6% for the rest of the year. In 2012, the overall market index posted a loss of 3.3% in the second quarter, but managed to post a 1.3% advance for the rest of the year. Other market strategists have reached similar conclusions based on historical data. Sam Stovall of CFRA Research noted that the 15 strongest first-quarter returns since World War II averaged 12.5%, while subsequent second quarters averaged 3.7% gains. “I think this gives investors something to feel optimistic about,” said Stovall, CFRA’s chief investment strategist. “Cooling Engines” To be sure, many investors see some digestion of earnings after the recent rally. In fact, given that the S&P 500 is already higher on the year by just over 10%, many predict that the remainder of the year could become more volatile. This week, Piper Sandler said the S&P 500 index will see a 5% to 10% correction in the coming weeks, and notably dropped Nvidia from its model portfolio, citing extended valuations. The Wall Street firm held its year-end target for the S&P 500 Index at 5,050, down 3.8% from Wednesday’s close. “As investors show complacency with the current uptrend and display a fear of missing out (FOMO), we believe now is the time to be more vigilant and ‘cool the engines,’” Craig Johnson, chief market technician at Piper Sandler, wrote Wednesday. One bearish strategist predicts that stocks could fall in the second or early third quarter as the macroeconomic picture worsens. Brian Nick, senior investment strategist at the Macro Institute, said he is looking for signs of growing pressure on consumers. The recent cooling of home prices, for example, could be an early sign that the market could take a turn for the worse, as home sellers are forced to cut prices to attract buyers, he said. He expects the stock to deteriorate accordingly. “If stocks started to price in a recession, you would typically see a decline in the 20% area at least, compared to these valuations today,” Nick said. “And given the magnitude of the rate increases that we’ve seen, and the fact that they think they’ve actually just started to impact the economy, we’re probably looking at something even a little bit worse than the typical recession.” “So, something in the 30% to 35% range would not be unexpected at all, again, based on where valuations are and based on what we think is the likely severity of the next slowdown,” he added Nick. A ‘Too Conservative’ Target But others expect any decline in the second quarter to be more of a healthy retreat in what is still expected to be an up-trending market. Many on Wall Street remain bullish on the overall direction of the market. Oppenheimer’s John Stoltzfus, for example, raised his forecast to 5,500 from 5,200, making his target the highest in the CNBC survey of market strategists. The 5,500 level represents an increase of about 15% for 2024. The S&P 500 Index was around 5,250. Ayako Yoshioka, senior portfolio advisor at Wealth Enhancement Group, said she expects the second quarter will likely be weaker than the first, but she believes the overall trend remains bullish for stocks as long as the Fed lowers rates three times this month. ‘year. “It’s hard to say we will increase another 10%,” Yoshioka said. “I think it would be a little bit expensive, a lot more expensive, than it is today. And so, I think it might be a tougher ask.” Likewise, CFRA’s Stovall remains bullish on stocks. The chief investment strategist has a year-end target of 5,200 on the S&P 500, but said the target is subject to revision now that the broader index has surpassed that level. “I mean, right now, my estimate for the full year was about a 9% increase,” Stovall said. “But history says, ‘no, I’m actually too conservative,’ and that the gain will probably be closer to 15% and more.” The March jobs report will also be released next week. Economists polled by FactSet expect the U.S. economy created 180,000 jobs last month, down from 275,000 in the previous month. The unemployment rate, meanwhile, is expected to have fallen slightly, to 3.8% from 3.9%. Next week’s calendar All times ET. Monday 1 April 9.45am Markit PMI Manufacturing, Final (March) 10.00am Construction Spending (February) 10.00am ISM Manufacturing (March) Tuesday 2 April 10.00am, Final Durable Orders (February) 10.00am Factory Orders (February) 10:00 JOLTS Job Openings (February) Wednesday 3 April 8:15 ADP Employment Survey (March) 9:45 final Composite PMI (March) 9:45 final Markit Services PMI (March) 10:00 ISM Services PMI ( March) Thursday, April 4 8:30 am Continuing Jobless Claims (3/23) 8:30 am Initial Claims (3/30) 8:30 am Trade Balance (February) Earnings: Lamb Weston Holdings, Conagra Brands Friday, April 5 8: 30 March Jobs Report 3 pm Consumer Credit (February)