The S&P 500 index made two failed attempts last week to take out its record close from February, causing some investors to worry the rally is running out of steam. History, on the other hand, suggests market bulls shouldn’t be too quick to throw in the towel.
The large-cap U.S. stock-market benchmark SPX, +0.29% last Wednesday closed less than 1% away from its all-time finish of 3,386.15 set on Feb. 19, after briefly trading above that level. It again flirted with a record on Thursday before a late pullback and ended Friday 0.4% away from the all-time closing high.
On Monday, it briefly traded as high as 3,386.50, according to FactSet, but then pulled back to trade near 3,382 in recent action.
While the S&P 500’s failure to take out the record last week prompted some analysts to worry that resistance near the all-time highs may be too tough to surmount after a bounce that has already seen the index rally more than 50% from its pandemic-induced March 23 low, Sam Stovall reviewed the market tape to see whether missing the high tends to spell doom for rallies.
Stovall, chief investment strategist at CFRA, found that whenever the S&P 500 previously closed within 1% of a new high, that milestone was eclipsed within an average of just eight calendar days. The longest wait, he said, was 21 days following the bear market of 2000-2002, followed by a 20-day wait after the bear market of 2007-2009, while all others took eight days or fewer.
“Should history repeat, and there’s no guarantee it will, the S&P 500 should set a new all-time high by the end of August,” he said.