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The S&P 500's Streak of Record High Closes Ends

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In last week’s edition of the S&P 500 chaos series, we made a point of recognizing the S&P 500′s recent winning streak, which lasted just one more day after we commented on it. Alas, it ran into a wall of unexpected inflation, which snapped the streak to a close.

Alternative Futures - S&P 500 - 2021Q3 - Standard Model (m=-2.5 from 16 June 2021) - Snapshot on 12 Nov 2021

From our perspective, it’s interesting to see the upper end of the redzone forecast range marked the top for the index’ streak, although we recognize that’s a coincidence. We do wonder though what the redzone forecast range would look like if we had anticipated how the outlook for investors would change when President Biden’s proposed tax rate hikes died on Capitol Hill.

Getting back to the streak itself, Schaeffer’s Investment Research’s Rocky White was impressed enough to recount the history of the S&P 500′s previous 8-day or longer winning streaks with record-high closes:

The S&P 500 Index (SPX) just did something it hasn’t done in nearly 25 years. On Monday, it closed at an all-time high for the eighth day in a row. The streak came to an end with yesterday’s down day. The table below shows data on each streak and how the index did going forward.

In the short term, the S&P 500 was down a week later in three of the past four occurrences. So, if we struggle in the short-term, it should not be a surprise. Three months later, however, the index was higher after all seven previous instances. This week I’ll look at how these future returns compare to typical market returns and similar streaks for the Nasdaq Composite (IXIC), which also had eight straight days of all-time highs.

Schaeffer Research: 8 Straight New All-Time Highs (S&P 500), 1928-2021

White continues reviewing the historic record to see how investors fared after the S&P 500 or its predecessor indices ran a record-high setting streak:

The table below shows how the S&P 500 performed after each of these streaks ended. There are limited data points, but an end to the streak has not been an indication of buying exhaustion; stocks have tended to do well even after the streaks ended. Perhaps one thing to be wary of is the two signals that occurred within a year just before the Great Depression and then you have two signals within a year in 1964, after which stocks struggled. We haven’t had two streaks of eight recently but earlier this year we had a streak of seven straight all-time highs. Any one signal of all-time high streaks may be nothing to worry about, but if they become more prevalent, perhaps it can signal a major top.

Schaeffer Research: S&P 500 After All-Time High Streak Ends and S&P 500 Since 1928 (to 9 November 2021)

In other words, pretty much anything can happen. What will happen will be paced by the random onset of new information, such as what we saw in the market-moving headlines of the past week:

Monday, 8 November 2021
  • Signs and portents for the U.S. economy:
  • Fed minions confounded by real world data, claim inflation will just go away, want two rate hikes in 2022 after stimulus bond buys stop, focus on gender gap to fix economy, starting to be concerned by housing inflation:
  • Fed’s Evans: inflation rise is ‘temporary,’ but sees upside risk
  • Fed’s Bullard says he sees two rate hikes in 2022
  • Fed’s Harker says he does not expect rates to rise until taper is complete
  • Fed’s Powell says bridging gender gaps key to successful economy
  • Fed’s Bowman sees risks in housing market, flags inflation pressure
  • Fed’s Randal Quarles to resign at end of December
  • Bigger trouble and stimulus developing in Japan:
  • ECB minions claim high Eurozone inflation will just go away, want to keep stimulus policies going:
  • Wall Street closes up on infrastructure gains but Tesla weighs
  • Tuesday, 9 November 2021
    • Signs and portents for the U.S. economy:
  • Fed minions wants to keep stimulus going, want to wait until next year to see where economy is going, want to hold off rate hikes:
  • Bigger stimulus developing in Japan:
  • Bigger trouble developing in the Eurozone, China, Mexico:
  • Chinese property bonds dive as contagion kicks in
  • Analysis-Corporate Mexico feels heat from global supply chain crunch
  • ECB minions notice central bank’s stimulus policies are hurting banks, say housing inflation to continue, more inflation on the way:
  • ECB must prepare for higher inflation – Knot
  • Wall Street declines, ending a run of record highs
  • Wednesday, 10 November 2021
    • Signs and portents for the U.S. economy:
  • Biden to sign $1 trillion infrastructure bill on Monday
  • Bigger trouble developing in China:
  • Bigger inflation developing all over:
  • ECB minions think productivity gains will go away, Japan gearing up for bigger stimulus:
  • Wall Street ends lower as economic data raises long-term inflation threat
  • Thursday, 11 November 2021
    • Signs and portents for the U.S. economy:
  • Fed minions not sure what transitory inflation means for policy, top job up for grabs between dove and uber-dove for fighting inflation:
  • Bigger trouble developing in Japan:
  • Bigger inflation developing in Japan:
  • S&P closes little changed as chips boost Nasdaq in muted holiday trading
  • Friday, 12 November 2021
    • Signs and portents for the U.S. economy:
  • Fed minions make show of plan to taper stimulus bond buys, discover poor are hurt more by inflation:
  • Bigger trouble, stimulus developing in Japan:
  • Positive signs in the Eurozone:
  • ECB minions want governments to spend more to keep inflation higher, BOE minions want to hike rates to fight inflation:
  • Bank of England to be first major bank to hike rates, probably in December – economists polled by Reuters
  • Wall Street ends higher with boost from big tech
  • The CME Group’s FedWatch Tool is now projecting a greater than 50% probability of a quarter point rate hike in June 2022, followed by another in September 2022, and a third in December 2022. That’s a lot of change in just the past week.


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