The S&P 500 has gone about 18 months without a fall of 10% or more from a record close. In seven past stretches this long since 1950, the index was higher a year later in five. The Motley Fool's analysis finds the streak alone is not a clear warning sign.
The S&P 500 last closed in correction territory on April 28, 2025, ending the day at 5,528.75, just over 10% under the record close of 6,144.15 set on Feb. 19. Since then, every close has stayed within 10% of a record, which means the index has gone more than 380 trading days without what investors normally call a correction.
Even the 4.36% drop on Nov. 5, when chipmakers and other companies linked to artificial intelligence sold off, left the index only about 6% under its high close of 7,818.93 on Oct. 6. The S&P 500 is now near 7,520, about 4% under that record, and a close below about 7,037 would snap the streak.
Five of seven past streaks were higher a year later
Author Daniel Sparks looked back through the index's history since 1950 and found seven stretches this long. A year after each reached this length, the index was higher in five of them, with a median gain of around 7%.
The gains and losses varied widely. The largest gain, at around 28%, followed the 1986 mark, while the smallest, about 6%, followed 1992. The year after January 2022 was the worst, with the index dropping about 17% as the Federal Reserve began hiking interest rates that March to fight inflation.
A streak is not a signal either way
Over every trading day since 1950, the index ended the next 12 months higher in about 75% of those periods. Five of seven, by comparison, comes to around 71%. Sparks says seven runs is a tiny sample, and he adds that interest rates and the index's valuation are likely to matter more in the coming year.
Sparks does not see the streak as a warning sign for a buy-and-hold investor. He also says it isn't a bullish signal either, since the calm ended within about two months in 1960 and again in 2022 but lasted years in the 1990s.
Source: The Motley Fool
Trading involves risk.