Make That 24 Out 24

August 9, 2017

2 minute read

A year ago, we noted that the S&P 500 Index was up five consecutive months, and going back to 1950, it was higher a year later 23 out of 23 times that scenario occurred with an average gain of +12.9%. Well, the S&P 500 was up +13.6% a year after its most recent five-month win streak that ended in July 2016 – making that 24 out of 24.

2017 has been a very solid year for the bulls, but the big question is: how obvious were the signs? Obviously, the five-month win streak last year was a huge indication to be on the lookout for more equity strength, but were there others? If you’ve been following this blog, we identified more than a few potential clues:

Last year was the first outside year for the S&P 500 since 1982. That year kicked off a huge bull market.
When the S&P 500 is up more than 1% after the first five days of the year (like this year), the full year is higher 88.5% of the time and up 15.1% on average.
When the S&P 500 is higher in January (like in 2017), the next 11 months are higher 88% of the time and up 12.1% on average.
If the S&P 500 is higher in both January and February (like in 2017), the full year has been higher 25 out of 26 times and up 19.5% on average.
When the S&P 500 is up more than 5% in the first quarter (like in 2017), the final 9 months gain another 9.6% on average and are higher 87.5% of the time.
Finally, when the S&P 500 is up by more than 8% at the midpoint of the year (like in 2017), the final six months are higher 21 out of 25 times.

Per Ryan Detrick, Senior Market Strategist, “Although we’ve gone more than nine months without so much as a 3% correction in the S&P 500, it is important to remember there were many signs over the past 12 months that suggested this bull market was far from over. As we’ve noted in the past, bull markets don’t die of old age, they die from excesses. From an accommodative Federal Reserve, to low inflation, to an expanding global earnings backdrop, to a continued ‘one foot out the door’ mentality from most investors – we simply aren’t seeing the type of excesses seen at previous major market peaks. The bull might be old, but it still has horns.”