Streaking Into the Record Books?

Well, this market is nothing if not special.  The S&P 500 has gone 84 trading days without a loss of 1% or more.  As you can see in the table below, that ranks it #17 of all streaks since 1950.  If it can last through February 27th, it will be the longest streak since 1995.  If it can last through March 23rd, it will be the longest streak since 1966.  The all-time record (since 1950) would take us all the way to June.

Here’s another way to think about this — look at the VIX.  It closed today at 10.85.  Sleepy, sleepy… no risk to be found.  When you don’t have any significant falls in the market, the VIX tends to sag.  Aside from the election, which is an exception to the rule, the last two peaks of the VIX over the last six months were after 1%+ drops in the S&P 500.

The same would apply to credit spreads, which are also tight.  No one expects a change in liquidity, a credit event, a national security incident, etc.  But as I commented on Friday:

This is an awkward time when you have a lot of people arguing that the market CAN’T GO HIGHER!  Let me tell you, it can go higher.

Will it go higher?  Who knows?

Should it go higher?  That’s the better question, and may help with the prior question.  If you’re thinking strictly about absolute valuation, it shouldn’t go higher — we’re in the mid-80s on a percentile basis.  On a relative valuation basis, where are you going to go?  On a momentum basis, it should go higher.  It’s not a rip-roarer in terms of angle of ascent, which bodes well for it.  The rallies that fail tend to be more violent, and this one is kinda timid.

We sometimes ask in investing “who has the most to lose?”  As in my tweet above, that very well could be asset allocators with low stock allocations that conclude that they need to chase the rally.  Or, retail waking up to how great this bull market has been, concluding that they have been missing out on “free money.”

Truth, I’m not hearing many people at all banging the drum for this rally.  There is a lot of skepticism.

As for me, I don’t care much.  It’s not a core skill of mine, nor is it a part of my business.  I am finding cheap stocks still, and I will keep investing through thick and thin, unless the 10-year forecast model that I use says future returns are below 3%/year.  Then I will hedge, and encourage my clients to do so as well.

Until then, the game is on.  Let’s see how far this streak goes.

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Streaks of over 50 days since 1950

RankDateStreakYear
110/8/19631541963
22/28/19661541966
36/7/19541421954
46/3/19641311964
54/17/19611191961
67/26/19571151957
76/12/19851121985
85/17/19951101995
912/15/19951051995
1010/30/19671031967
115/13/19581021958
1211/2/1993951993
1311/24/2006942006
142/12/1993871993
158/15/1952861952
1612/20/1968851968
172/10/2017842017
188/31/1979821979
1911/30/1964811964
206/2/1950751950
216/1/1965751965
228/23/1972741972
235/8/1972731972
242/4/1953701953
254/24/1962671962
267/16/2014662014
2710/14/1958651958
286/10/1969651969
2912/2/1996651996
301/27/2004652004
312/3/1994631994
321/4/1962601962
338/18/1976601976
3412/20/1985601985
359/18/1961581961
365/14/1971581971
372/9/1989581989
387/19/1968571968
391/19/2006562006
4010/18/1951551951
419/13/1978551978
422/27/1963541963
433/29/1977541977
446/23/2016542016
458/21/1953531953
467/11/1960531960
4711/19/1969521969
489/8/1994521994
499/8/2016512016