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The S&P 500 index closed at a record high on Monday, marking its second straight high close after the index broke a two-year streak without a record high on Friday.
And stock market history suggests that this new record is indicative of a better-than-average year ahead for the S&P 500.
Keith Lerner, co-chief investment officer at Trust Co., said in a note to clients Monday that in 13 of the last 14 times, the index has been at least a year between all-time highs and 12 months later. pointed out that the S&P 500 index was higher. What was the average return over the subsequent 12 months? 14%, about 3 percentage points higher than the average annual return of the S&P 500.
Furthermore, in 9 of these 14 cases, the S&P 500 Index rose by at least 10% in the following year. So the broad bullishness that gripped Wall Street strategists during the 2023 rally appears to have a solid footing in historical terms.
The only time the stock price fell after a year was in 2007. That record closing price took seven years after the tech bubble burst and was followed, of course, by the 2008 financial crisis, which saw the S&P 500 index drop nearly 60% from high to low.
For Lerner, the outlier underscores the need for the Fed to “stick to a soft economic landing” and lower inflation and interest rates without triggering a recession. The market is pricing in that, he added.
Mr Lerner also stated:[like] It should not be used alone for any historical research. However, it does suggest that making new highs after a long period of time tends to be a positive sign. ”
And while everyone in the investing world knows past performance is no guarantee of future returns, there are patterns in the calendar.
Stocks can go for long periods of time without making new highs, essentially due to a recession or something close to it.
The market can feel like a haphazard walk every day. Over time, stocks, and the stock prices of the companies they represent, track the overall performance of the economy.
To put it in perspective, the S&P 500 has been flat over the past two years.
Looking at it another way, the brutal bear market of 2022 showed how afraid investors are of inflation and its impact on economic growth. Last year's bull market reveals just how long it took investors to overcome this fear.
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