The S&P 500 is poised to achieve a historic milestone, potentially closing at a record high for the first time in over two years. This resurgence follows a remarkable rally that propelled the large-cap U.S. benchmark to new heights towards the end of last year, thanks to the anticipation of lower interest rates.
Early on Thursday, the S&P 500 (SPX) showed a promising 0.3% gain, reaching 4,797.58 points. This surpasses its previous record close of 4,796.56 points set on January 3, 2022.
Remarkably, it has been 507 trading days since the S&P 500 last achieved a record finish, according to Dow Jones Market Data. While it is difficult to determine the exact implications of this milestone for investors, historical trends suggest positive returns one year after such significant gaps between all-time highs. Ed Clissold and London Stockton emphasized this observation in December, highlighting that since 1928, there have only been five streaks longer than the current one (1954, 1958, 1980, 2007, and 2013).
Clissold and Stockton make a compelling case favoring a breakout to a new up leg rather than an overbought market in need of correction. Based on NDR data, the S&P 500 has consistently outperformed its long-term average returns in the subsequent one-, three-, six-, and twelve-month periods after closing gaps of over a year between records. It’s worth noting that one-month returns are slightly less robust, potentially indicating a short-term overbought condition in certain instances.
In fact, when the S&P 500 concluded its hiatus of over a year between record highs, it went on to trade higher in 13 out of 14 instances over the next year, encompassing 252 trading days. An exception occurred in 2007. The median return during these periods has been an impressive 13.4%, while the mean return has surged to 14%—significantly surpassing the mean for all one-year periods at 7.5%.
Digging deeper, the data also shows that returns 21 days after the S&P 500 hits a new high have been positive 71.4% of the time. The mean return during this period is an encouraging 0.9%, outperforming the mean for all periods at 0.6%. Meanwhile, the median return reaches an even more promising level of 1.8%.
As investors eagerly await the outcome, the resounding rally of the S&P 500 paints an optimistic picture. The potential for a new record high showcases the strength and resilience of the market, reinforcing positive expectations for the future.