Man, what a race it was. The S&P 500 is closing out the first quarter with an epic winning streak: The index is up 10% year to date and an astonishing 25% in the past five months. Achieving 25% in any five-month period is a very rare event. Since 1950, there have been only seven other periods that have performed better: The S&P 500's epic monthly gain streak through March 2024 24.6% (current five-month streak) August 31, 2020, up 35.4% (five-month streak) August 31, 2009 up Up 27.9% (six-month line) January 31, 1999 Up 33.6% (five-month line) March 31, 1986 Up 25.8% (six-month line) December 31, 1982 Up 31.3% (six-month line) May 31, 1975 Up 32.9 % (Six-month line) February 28, 1975 28.4% rise (Five-month line) Pullback imminent? Maybe, but the momentum is very strong. Of course, with a wave like this, everyone is now in the business of predicting a pullback. “This cannot go on,” is the phrase repeated everywhere. “We're going to pull back 10%. We have to do that, right? Not necessarily. And the momentum has been very strong. Noting that the S&P 500 is currently trading roughly 12% above its 200-day moving average (which indicates strong momentum Extremely), Todd Sohn of Strategas points out that “while mean reversion is a threat, six-month forward returns tend to skew higher than historical averages.” His view: Even after these epic rallies (with the S&P 500 rising by 25% or more over a five-month period), and after six months, the market is higher most of the time: Five-month epic streaks (five-month ending) August 31, 2020 Up 35.4% (up 8.9% after six months) August 31, 2009 Increase 27.9% (up 8.2% after six months) January 31, 1999 Up 33.6% (up 3.8% after six months) March 31, 1986 Up 25.8% (down 3.1% after six months) December 31, 1982 Up 31.3% (up 19.5% after six months) May 31, 1975 Up 32.9% (up 0.1% after six months) February 28, 1975 Up 28.4% (up 6.5% after six months). Only once out of seven, in 1986, has the S&P 500 fallen six months later after similar periods. Not only is technology capital-intensive, but the breadth of the market is expanding another chestnut – “It's all seven wonders!” – This is just plain wrong. Technology still lifted the market higher this quarter, but its impact diminished in March, and other sectors also saw strong advances. Select S&P 500 Sectors YTD Communications Services is up 15%, Technology is up 12%, Energy is up 11%, Financial Services is up 11%, Industrials is up 10%, and Healthcare is up 8%, and it was the only sector that… Declining during the quarter was real estate, which fell by 3% during this period. . And it's not just a few large stocks rising: the market has expanded. About 70% of the S&P 500 is in the green this year. The S&P 500's high/low has been on a tear since mid-January, with far more stocks rising on a daily basis than falling. So is the Russell 1000 Index, which is a broader measure of the market. This broader market strength is crucial to the market's progress. “Divergence and concentration can also be seen all the way through in major bull markets, and are therefore only important when a trend is losing steam with bad breadth, meaning most stocks are not participating,” veteran market watcher Ned Davis said in a recent note. For customers. “We saw continued strength with the S&P 500 rising every month from November to February, and this was always followed by other months of strength,” he said. “Even if this new spike in breadth is a cyclical peak, the virtual record shows that it has historically come about 39 weeks, on average, before the market peak, so I conclude that the cyclical bull is still alive and kicking,” Davis said. What does all this mean? It seems like some sort of decline after these epic gains makes sense. What may not make sense, given market history, is to think that you know when to time these declines or to try to figure out whether any decline might be brief or shallow. Given the kind of progress we've seen and the breadth of the market, “it's more profitable to stay here than try to time the markets,” Alec Young, chief investment strategist at MAPsignals.com, told me. “Markets tend to do much better than usual when we see big moves like this. You're probably better off just sitting on your gains,” he said.
