The big bounce off the December 24 lows continued last week, as the S&P 500 Index added 2.9% for the week. In fact, it has gained 2.9%, 1.9%, 2.5%, and 2.9% over the past four weeks for a total gain of 10.5%. Of course, the S&P 500 did have its worst December in 87 years and worst fourth quarter since the 2008-09 financial crisis, so stocks were historically oversold coming into 2019. Still, this bounce is quite impressive.
Just what could this extreme strength be telling us? “Here’s the catch: Stocks have been up huge the past four weeks, but history also tells us that being up more than 1.5% for four consecutive weeks actually tends to see continued outperformance going out the next three months. Don’t fight the trend is another way to put it,” explained LPL Senior Market Strategist Ryan Detrick.
As our LPL Chart of the Day shows, the S&P 500 tends to continue to outperform after similarly strong four-week stretches. Since 1950, after being up 1.5% or more for four consecutive weeks, the index’s average return going out 8 and 12 weeks has been more than double its overall average.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
This research material has been prepared by LPL Financial LLC.
To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.
The investment products sold through LPL Financial are not insured deposits and are not FDIC/NCUA insured. These products are not Bank/Credit Union obligations and are not endorsed, recommended or guaranteed by any Bank/Credit Union or any government agency. The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible.
For Public Use | Tracking # 1-814594 (Exp. 01/20)