A Closer Look At New Highs

Market Blog Posted by lplresearch

Wednesday, June 9, 2021

The S&P 500 Index is flirting with new highs unlike nearly any time in history. In fact, it has now gone nine days in a row closing within 1% of an all-time high without breaking through. “There’s an old saying about not shorting a dull market. Well, lately it has been about as dull as it gets,” explained LPL Financial Chief Market Strategist Ryan Detrick. “The catch is other times that saw long streaks without a new high, yet very close to one, actually didn’t perform as well as one might expect.”

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Taking things a step further, the S&P 500 has closed within 0.15% of an all-time high without closing at a new high for three straight days. In the history of the S&P 500, that has only happened one other time, in September 1964. Stocks were flat three months later then and up only 2.6% six month later, so although this is only a sample size of one, a sharp move higher in the near term appears less likely.

We’ve shared this next chart before, but given we are talking about new highs it is important to point it out again. New highs usually happen in clusters that can last for a decade or more. Given this market has been making new highs since 2013, despite the 2020 bear market, history would suggest there could be several more years before this strong run is done.

View enlarged chart.

Take another look above. This year has a good amount of new highs already and it isn’t even half way over. In fact, 26 new highs over the first five months of the year is the most for any year during the first five months since 32 new highs in 1998.

Another angle on this: Should the S&P 500 make a new high in June, it would make a new high every month for the first six months of the year. This rare feat last happened in 2014 and 1986 before that. The rest of the year those years added 5.0% and lost 3.5%, respectively.

The S&P 500 is only 0.13% away from the last all-time high set back on May 7. Odds do favor another new high will eventually take place, which means this bull market continues. In the LPL Chart of the Day we show that this new bull market is already up 89% in just over a year, giving it one of the best annualized returns ever for a bull market, although bull markets do tend to have strong annualized returns early.

View enlarged chart.

What happens after stocks make new highs? Here’s a chart we shared last August. The bottom line is investors shouldn’t be scared of new highs, even though many are scared of heights.

View enlarged chart.

So there you have it, various looks at new all-time highs. Now we just have to make one!


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All index and market data from FactSet and MarketWatch.

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