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.
After the Streak Ends
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.
While the S&P 500 was racking up eight straight all-time highs, I find it interesting that no individual stock had a similar streak. Linde (LIN) was the closest which had seven straight new highs. That streak, however, reached eight days today so it’s still intact. Below are the S&P 500 stocks with the longest streak of all-time highs as of Monday’s close (the end of the S&P 500 streak). The streaks with the asterisk were up today so those streaks continue.
The Nasdaq Streak
The Nasdaq Composite also ended a streak of eight straight all-time highs. The Nasdaq data only goes back to 1971, but there have been more streaks from this index. This recent streak was the 12th time the index hit all-time highs eight days in a row. The table below summarizes the returns for the Nasdaq following the prior 11 occurrences. Looking at the returns, it looks like a tendency for a choppy market going forward. The one-week and three-month average return is negative, but the one-month and six-month average return was positive.
The table below shows the individual Nasdaq Composite all-time high streaks. A ten-day streak in late 2019 saw the index fall nearly 20% over the next three months but then was positive a full six months after the streak. This, of course, had more to do with the Covid-19 crash and recovery than the all-time high streak. The streak before that one was in mid-1998 in which, again, the Nasdaq was down nearly 20% over the next three months and positive over the next six months. I’m not sure this means much for our current situation, but the last two instances were choppy to an extreme.