Wall Street Took a Long Break Between Its Last Two Records and History Tells Us That’s Good News

The S&P 500 index closed at a record high on Monday, its second consecutive record close after breaking a two-year streak on Friday without the index reaching a record high.

And stock market history shows that this range between all-time highs represents a better-than-average year for the S&P 500.

In a note to clients on Monday, Truist co-chief investment officer Keith Lerner said that in 13 of the past 14 instances in which the index spent at least a year between all-time highs, the S&P 500 was 12 months higher. Later , Average profit over the next 12 months? 14%That’s about 3 percentage points above the S&P 500’s historical average annual return.

Moreover, in nine of those 14 instances, the S&P 500 rose at least 10% over the following year. The widespread bullish belief that gripped Wall Street strategists during the 2023 rally appears to be solidly supported from a historical perspective.

The only example of a decline in shares after one year was 2007. This record close came seven years after the tech bubble burst and, of course, it was followed by the 2008 financial crisis, which led to the decline of the S&P 500. Nearly 60% decline from peak to trough,

For Lerner, this highlights, externally, the need for the Federal Reserve to “achieve accommodative economic conditions” and reduce inflation and interest rates without triggering a recession. The market is already discounting, he says.

The gain made by the S&P 500 index after reaching an all-time high for the first time in at least a year.  After a long period between record closes, stocks tend to outperform over the next 12 months.  (Source: Trust IAG, FactSet)The gain made by the S&P 500 index after reaching an all-time high for the first time in at least a year.  After a long period between record closes, stocks tend to outperform over the next 12 months.  (Source: Trust IAG, FactSet)

The gain made by the S&P 500 index after reaching an all-time high for the first time in at least a year. After a long period between record closes, stocks tend to outperform over the next 12 months. (Source: Trust IAG, FactSet)

Lerner also stated that “Like any historical study, it should not be used in isolation, however, “Suggests that reaching new highs after a long period of time is a positive sign.”

And while everyone in the investing world knows that past performance does not guarantee future results, the calendar has its own patterns. Stocks go long periods without reaching new highs for reasons that inevitably lead to or near recessions.

From day to day, there can be a sense of chaos in the market. Over time, stocks, and the stocks of the companies they represent, follow the overall performance of the economy.

Seen from the perspective that only time gives, The S&P 500 has been nearly flat over the past two years.

Put another way, the brutal bear market of 2022 showed us how much investors feared inflation and its effects on economic growth; Last year’s rally shows how long it took investors to recover from this fear.

write articles originally in english By miles udland, Head of News at Yahoo Finance.

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