It's been 54 trading days since the S&P's last high
Stocks last hit an all-time high on Jan. 26, which is nearly three months ago. Since then, the S&P 500 Index (SPX) ultimately closed a bit more than 10% off that high before bouncing up into no-man’s land between the all-time high and the recent lows. The uptrend from the SPX has been so steady over the last several years, I figured this was one of the longer stretches of time we’ve gone without seeing a new high.
I found that the last all-time high was 54 trading days ago. It’s the third streak of this length since the 2008 market crash, as you can see in the chart below. As I often do, this week I first take a broad look at how stocks have behaved after similar circumstances, and then I boil it down further to focus on those times that most closely resemble the current environment.
Where Stocks Go From Here, Historically
Below is some data on the S&P 500 Index since 1950. I looked at each time the index hit an all-time high and then retreated from that level and was still below it 54 trading days later. The first table below summarizes the index returns going forward after 35 previous occurrences. The returns out to three months are right in line with typical market returns, which are in the second table below. When you get out to bigger time frames, there’s a bit of underperformance. The S&P 500 averages a 4% return over the next year, with 60% of the returns positive. The average "anytime" one-year return over this time is almost 9%, with more than 70% of the returns positive.
What if we only consider the returns that mimic the current environment? I mentioned earlier that the S&P 500 has closed about 10% from its all-time high but has since rebounded from there -- yet it still sits more than 5% from the high. Therefore, I specifically looked at times where the S&P 500 last hit a high 54 trading days ago, with the drawdown from the high being within 2% of the size of the current drawdown (roughly 8% to 12%), but then it moved higher and still sat more than 5% from the high.
Doing this, I get 10 previous returns. The results are not good. One year after these similar occurrences, the S&P 500 averages a loss of more than 5%, with just 40% of the returns positive.
A Year Until Another SPX High?
The table below lists the individual occurrences that generated the data in the table above. Let’s hope the returns going forward are nothing like those of the last signal. The last signal occurred just before the 2008 stock market crash. The last two columns of this table show how long it took for the index to get back to its all-time high and how much further it ultimately fell before recovering. The median amount of time it took to get back to its high was 12.5 months, with a median drawdown of 6.3%. Hopefully, this is not what it looks like this time going forward.
