Market Extra: Stock market’s 5-month win streak should cheer the bulls

Nothing is written in stone, but history shows that the stock market’s recent performance has almost always been followed by further gains.

The S&P 500 SPX, -0.02% has been in a nearly uninterrupted uptrend since the end of October. On a total return basis, taking dividends into account, it has risen in every month since, for 10 straight months of gains.

Looking solely at price, the benchmark equity index has risen in nine of the past ten, with March serving as the only exception. It fell a tiny 0.04% over the course of that month.

While many investors are concerned about market valuations at current levels, that April-to-August streak could provide solace, as “going back in history a five-month win streak is one of the more bullish signals for longer-term returns.”

That’s according to Ryan Detrick, senior market strategist for LPL Financial, who argued that five-month winning streaks were followed positive gains over the coming year about 96% of the time.

“This is the 25th time the S&P 500 was up five straight months since 1950,” he said in a research note. “The good news for bulls is a year later it was higher 23 out of the previous 24 times and higher 13.2% on average.” The last time the S&P 500 failed to be higher 12 months after a five-month winning streak occurred in the 1970s.

On a shorter-term basis, the S&P 500 is also usually higher in the month following a five-month streak, having risen in 20 of the past 25 instances, per LPL’s data. It rose an average of 1.3% over the subsequent month. Thus far in September, the S&P is up 1%.

The S&P 500 hit an intraday record on Wednesday, bringing its year-to-date advance to about 11.5%. At current levels, a 13.2% rise would take the index to 2,825 in 12 months.

The S&P also had a five-month streak between March and July of last year. Between July 2016 and July 2017, the index rose 13.7%.

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