Here’s a mind-blowing statistic: If the market is trading at the current level or higher at the end of the year, it will only be the fourth time in the past 100 years that the S&P 500 has enjoyed three consecutive years of double-digit percentage gains.
This is according to Howard Silverblatt, the senior index analyst at S&P Dow Jones Indices, who analyzed data going back to the S&P 500’s founding in 1957, and then earlier historical data extrapolated from the earlier 90-stock S&P index.
The last time the S&P 500 saw three straight years of double-digit returns was in the late 1990s. And, of course, we all know what happened next.
So does that give investors a reason to worry about the recent rally?
“I don’t think we’re in the same kind of bubble territory as we were in the beginning of ’99,” said Gina Sanchez, founder of Chantico Global. “However, we do have some bubbly elements happening within equities.”
Still, Sanchez says that American stocks are still much more attractive than other investment opportunities around the globe.
U.S. equities “are still a pretty good deal,” she said, especially when compared with stocks in developing countries.
Meanwhile, the technicals also suggest further upside, according to Piper Jaffray senior technical analyst Craig Johnson.
“The trend is our friend,” Johnson said. “And the trend is up.”
Johnson, who is also the president of the Market Technicians Association, said investors should forget about the 1990s--today’s market is better compared with the 1950s.
“From ’52 to the mid-1960s, you had a very strong secular bull market,” he said. “Threequarters of the monthly returns in the decade of the 1950s were positive. So I think we’re in the same kind of scenario where this secular bull market is going to continue to work its way higher.”
For at least the next year, Johnson sees the S&P 500 continuing to hold its 40-week moving average, which has served as support for its uptrend.
From Wednesday’s open of 2,051, “we still think 2,100 is a very achievable objective for this year and 2,350 for next year,” he predicted.
“When you look back at the secular bull market that started in ’52, you made five times your money,” Johnson added. “When we also saw the other inflation inflection point in 1982, the market worked its way higher and you made 15 times your money from ’82 to ’99. So, until we see some longer-term secular break, I think that we’ve got to continue to play this market to the long side…. Stick with the trend.”