The Waiting Game for Record Highs

The Waiting Game for Record Highs

April 24, 2019

The wait is over.

After more than seven months, the S&P 500 Index notched a fresh all-time closing high of 2,933.68 on April 23. To get here, investors have weathered back-and-forth in trade negotiations, a historic government shutdown, unrelenting Brexit headlines, the Federal Reserve’s (Fed) U-turn in policy, and signs of a global slowdown.

Fortunately, U.S. stocks have powered through record highs after a prolonged dry spell. As shown in the LPL Chart of the Day, the S&P 500 has climbed an average of 12.9% in the 12 months after snapping at least 6-month long record high drought, based on data since 1950.

Climbing the wall of worry

“It has been a long time since the S&P 500 scored a new high, yet this could actually hint at future gains,” said LPL Research Senior Market Strategist Ryan Detrick. “The waiting game for record highs may be tough, but it has proven the durability of this bull market based on sound fundamentals.”

Stocks’ rapid rebound this year has been impressive, especially 10 years into the current bull market. The S&P 500 has rallied more than 20% from the December lows amid the Fed’s pause in rate hikes, progress in trade talks, and an uptick in economic data after a soft beginning to 2019.

Historically, when U.S. stocks have gone six months without a record, investors have had to contend with a significantly longer waiting period (and more market volatility). The benchmark has taken an average of 25 months to post new highs in times it hasn’t hit a record within six months.

We’ve maintained that the late-2018 sell-off was overdone, and we see a compelling case for equities near these levels based on sound economic fundamentals. However, the recovery has been arguably a bit fast considering some of the reasons for the decline have yet to be resolved. We think the S&P 500 could eventually move higher and make a run at our 3,000 fair value target, but we wouldn’t be surprised to see volatility pick up over the next few months.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.

* Please note: The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1950 incorporates the performance of predecessor index, the S&P 90.

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