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A Closer Look At New Highs

A Closer Look At New Highs

June 09, 2021
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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.

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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.

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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.

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

 

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This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. All index and market data from FactSet and MarketWatch. This Research material was prepared by LPL Financial, LLC. Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates.  To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

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