The S&P 500 will test record highs in 2024 as rising profits fuel bull market

"You know what tends to happen when profits are at a record? Stocks tend to follow, something we expect to see in 2024," Ryan Detrick said.

• The stock market is poised to test record highs in 2024 as the second year of the bull market gets underway.
• Carson Group said it expects the S&P 500 to deliver low-double-digit returns next year thanks to rising profits.
• "If both profits and profit margins are increasing next year, that should be a nice tailwind for equities," Carson's Ryan Detrick said.

The S&P 500 is poised to test record highs in 2024 as the second year of the bull market gets underway, according to a Thursday note from Carson Group chief market strategist Ryan Detrick.

Rising profit margins and higher corporate earnings should serve as tailwinds for stock prices next year, leading to a hefty gain in the S&P 500, he predicted.

"If we can avoid a recession next year (our base case), then we think the chances of a year with potential low double digits returns is quite likely," Detrick said.

A gain of 10% for the S&P 500 would send it to about 4,800, which is just a few points below its record high reached in January 2022.

Detrick is encouraged by the fact that payrolls and incomes are still expanding at a healthy clip relative to pre-pandemic trends, and that steady economic growth should help fuel record profits for companies in 2024.

"You know what tends to happen when profits are at a record? Stocks tend to follow, something we expect to see in 2024," Detrick said.

While the stock market's underlying fundamentals remain on solid ground heading into next year, the same goes for the technicals. 

First, election years of first-term presidents have historically been strong, with an average S&P 500 gain of 12.2%. 

"Stocks have been higher during an election year of a new president going back to the past 10 presidents," Detrick said. "Higher the past 10 times and up 12.2% on average isn't anything to ignore and that is inline with a potential low double-digit return in 2024."

Finally, an ultra-rare and reliable technical signal flashed last week, and it has historically led to strong gains in the year-ahead.

The Zweig Breadth Thrust Indicator registers a buy signal when stocks move from extremely oversold levels to overbought levels in 10 days or less. It's only happened 17 times since 1945, and each time stocks were higher one year later with an average and median gain of 23%.

"Up more than 23% a year later and never lower is something I don't think we should ignore," Detrick said.