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S&P 500 hasn't fallen 5% from a peak in nearly 200 sessions--what that tells market historians

Dow Jones2021-08-21

It is an unbearable lightness of being for the S&P 500 index.

The broad-market measure of a basket of 500 U.S. stocks has been preternaturally resistant to pullbacks of late, despite concerns about the spread of the highly transmissible delta variant of COVID-19 and worries that the Federal Reserve’s strategy to reduce its bond purchases may be ill-timed.

Yet, the S&P 500 indexSPX,+0.81%has seen a largely uninterrupted ascent to such a degree that Friday marked the 200th session without a drawdown of 5% or more from a recent peak, making the current stretch of levitation the longest such since 2016, when the market went 404 sessions without falling by at least 5% peak to trough.

It is extremely rare for the market to enjoy such a period of relative effervescence. Indeed, such lengthy stretches without a 5% pullback or better have occurred on only eight occasions in the S&P 500 index, the attached table shows.

There clearly are reasons why the market is clambering higher in the recovery from COVID, set againsta daunting wall of worry. Investors are jockeying between areas of the market that are expected to boost revenue and profit faster than the rest of the pack and those that are beaten down and might benefit from a fuller economic rebound from coronavirus.

Buying on Monday helped the Dow Jones Industrial AverageDJIA,+0.65%and the S&P 500 indexSPX,+0.81%produce their 35th and 49th record all-time closing highs of 2021, respectively. Meanwhile, the Nasdaq Composite IndexCOMP,+1.19%stands a little over 2.5% from its record high put in on Aug. 5.

There is, of course, a sense that the party for stocks can’t last forever.

So, how does the market tend to perform in period after such a protracted bullish run?

The data set is very small but the S&P 500 has mostly climbed on a median basis, falling 1.2% in the following year but producing a median gain of 17.6% in a two-year period and 55% in the ensuing five-year period. The mean average return is better, showing a gain of 6.5%, 27.4% and 64%, respectively.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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Comment149

  • DenisL
    ·2021-08-23
    That’s insane! Is crash coming? 
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  • Sharkie
    ·2021-08-23
    there are many factors to look at, not just base on historic charts as the circumstances are different for every rise and fall of the market
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  • Eric2166
    ·2021-08-23
    Good
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  • Sharkie
    ·2021-08-23
    but the circumstances are different so you can’t just look at chart only as there are other parts of the jig saw puzzles we have to pay attention to
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  • Sharkie
    ·2021-08-23
    but the circumstances are different so you can’t just look at chart only as there are other parts of the jig saw puzzles we have to pay attention to
    Reply
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  • vnwz
    ·2021-08-23
    Nice!
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  • vnwz
    ·2021-08-23
    Nice!
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  • JoelLee
    ·2021-08-23
    Like and reply pls thx!
    Reply
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    • Ahlec
      replied
      2021-08-23
      Reply
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  • JoelLee
    ·2021-08-23
    Like and reply pls thx!
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  • Kathy819719
    ·2021-08-23
    Go go go
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  • CLT224
    ·2021-08-23
    Great
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  • IZLIN
    ·2021-08-23
    Reply
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  • ToTheM00N
    ·2021-08-23
    Buy
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    • hpt
      Ok
      2021-08-23
      Reply
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  • ToTheM00N
    ·2021-08-23
    Buy more
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  • Lucky_Leg
    ·2021-08-23
    Noted 
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  • YYKTAN
    ·2021-08-23
    Latest
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  • Newbie_21
    ·2021-08-23
    Always keep certain portion of cash for dollar averaging down. 
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  • seojun
    ·2021-08-23
    Will history rewrite itself?
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  • cdlsl
    ·2021-08-23
    Good!
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    • gstrader
      nice
      2021-08-23
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  • KCmax
    ·2021-08-23
    Ok
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