The S&P 500 just turned in its best 50-trading day rally since the index expanded to 500 companies in 1957, according to research from LPL Financial.
Over that time period, the index has returned 37.7%. If history is any indication, there are plenty more gains ahead.
LPL went back and looked at every 50-day rally since 1957 when the index expanded. Their research found that six and 12 months later, stocks were higher 100% of the time.
The average return for the six months following a 50-day rally was 10.2%. On the other hand, the average return for the 12 months following a 50-day rally was 17.3%.
After the longest bull market in history ended this year when the S&P 500 dipped all the way down to 2,191.86 on March 23, the market has been on a rocket ship higher. In just 50 trading days, the index has climbed 41.7% from the March 23 low. This puts it only 9% below the all-time high set in February.
Markets have been pushed higher by a combination of record stimulus packages and low-interest rates. In March, President Trump signed the $2 trillion CARES Act that provided financial aid to families and small businesses. Around the same time, the Federal Reserve cut interest rates to zero. Also, more recently it started directly purchasing Treasury bonds, mortgage-backed securities and even bond ETFs as it pledges an unlimited amount of asset purchases.
Uneven Recoveries Despite A Rally
While the stock market has surged higher over the last 50 trading days, recovery has been uneven, to say the least. This comes with some stocks – and entire industries – getting hammered by the economic lockdown caused by the coronavirus. Meanwhile, others, particularly those that benefit from people being home all day – and working from home – have lead the charge.
Amazon, Facebook and Netflix have all surged to all-time highs. Meanwhile, the video conferencing platform Zoom has jumped 228% this year alone.
On the other side are stocks like cruise line operator Carnival Corporation or American Airlines. Both have fallen 66% as the travel industry came to a standstill.
Despite the appearance of strength by the stock market, even the greatest 50-day rally in history can’t shake the doubters loose.
Since the rally began back in late March, the country has had more than 40 million people file for unemployment. Our country’s economic output is expected to drop by as much as 50% this quarter, and numerous CEOs refused to provide forward guidance for their companies as they just simply don’t know how bad and for how long the economy will suffer.
Throw in ongoing civil unrest and a very strong likelihood of a full-blown trade war between the US and China, and it remains to be seen if the economic recovery can continue to blossom in the coming weeks and months.