The S&P 500 is experiencing an epic win streak, with a 10% increase year to date and a remarkable 25% in the past five months. This level of growth is rare, with only seven other periods since 1950 surpassing it. Despite predictions of an imminent pullback, momentum is strong. Analysis shows that after periods of substantial growth like this, the market tends to be higher six months later most of the time, indicating that a significant pullback may not be on the horizon.
Contrary to popular belief, the market rally is not solely fueled by big-cap tech companies. While tech has been driving the market’s increase, other sectors like Communication Services, Energy, Financials, Industrials, and Health Care have also seen significant gains. Indeed, around 70% of the S&P 500 is in the green this year, indicating a broad-based rally. Market breadth, as measured by the S&P 500 advance/decline and the Russell 1000, is also strong, with more stocks advancing than declining daily. This broad market strength is essential for a sustained market rally.
Market experts caution against trying to time any potential market declines after such significant gains, as historically, markets tend to do better than normal following big moves. While a pullback may seem likely after such epic advances, trying to predict the timing or depth of any potential decline is often futile. Instead, sticking it out and holding onto gains is typically a more profitable strategy. Markets tend to continue to rally even after periods of substantial growth, making it advisable to ride out any fluctuations rather than trying to time the market.
While some may believe that a significant pullback is imminent after the S&P 500’s impressive gains, historical data suggests that the market is likely to continue rallying in the months following such periods. Tech stocks have played a significant role in the market’s growth, but other sectors have also seen strong advances. Market breadth, as indicated by advancing stocks in the S&P 500 and Russell 1000, is robust, further supporting the idea of a sustained market rally. Trying to predict and time market declines may not be a successful strategy, and holding onto gains is often more profitable in the long run.
The current market rally has been fueled by a broad range of sectors, although tech stocks have been leading the way. Despite predictions of an impending pullback, momentum remains strong, and historical data indicates that the market tends to continue rallying even after periods of substantial growth. Market breadth is also solid, with more stocks advancing than declining, suggesting that the rally is widespread and not limited to a few large-cap tech companies. Holding onto gains and riding out any potential fluctuations is often a more profitable strategy than trying to time the market.
Overall, the S&P 500 is experiencing a significant and rare win streak, with substantial gains in the past five months. Despite concerns about an imminent pullback, momentum is strong, and historical data suggests that the market is likely to continue rallying in the months ahead. Market breadth is robust, with a broad range of sectors contributing to the rally, indicating that the market’s strength is widespread. Instead of trying to time any potential declines, it may be more profitable to hold onto gains and ride out any fluctuations, as markets tend to do well following periods of substantial growth.
