Investors benefit from bull runs, but the longer they go on, the more chatter emerges about whether they’re still sustainable.
Although the
is lower on Wednesday, the index closed at its third-highest level in history on Tuesday, and has logged 13 record closes in 2024 alone. That comes on top of 2023’s 24% rally.
Those big gains have left some investors nervous about how long the market can go without pulling back.
However, Ned Davis Research Senior Portfolio Strategist Pat Tschosik argues that the S&P 500 can move even higher. The current bull run of 344 market days compares with an average of 694 days, on a historical basis going back to 1930, meaning the index could only be about halfway through the current rally.
Others have pointed to more fundamental reasons why the market can keep climbing, from investor sentiment to consensus growth expectations and stable economic data. Technical analysts also seem to support this, given January’s gains, and the history of strong returns during election years point to ongoing strength for the rally.
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Tschosik notes that charts can be telling, because when a “company or index that is over 50% of the way through its average length of days without a 20% correction and is making new highs is often in a longer uptrend with upside potential.”
The S&P 500 qualifies here, but it’s not at an extreme. More interesting, he notes, are the 19 component companies of the index that have gone the longest without a 20% correction, going back to October 2020. This includes
at the top with 992 days, and PepsiCo second with 990 days.
has had the shortest run at 834 days.
The list is heavy on names related to the insurance industry; beyond Travelers it includes
Chubb
,
and
Hartford Financial Services Group
.
That said, all 19 companies have had at least a 15% correction since 2020. And while tech has been the star of the show since last year’s Magnificent Seven-driven optimism, that sector’s pullback during the 2022 downturn means that there’s just one tech name on the list:
International Business Machines
,
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in the penultimate slot, with an 836-day run.
“This is the fourth-longest run for Big Blue and still one year shy of its record 1,083 day (4.3 years) run that ended in 2013,” notes Tschosik. “The company continues to shed non-core business to focus on cloud and artificial intelligence, and we suspect it could make a record run without a 20% correction.”
In fact, IBM stock soared to an 11-year high last month, boosted by its AI business. However the
itself is still trying to recapture a record high, as it ended Tuesday 0.14% below its record close of 16057.44 hit Friday, Nov. 19, 2021.
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Ultimately, no stocks, or indexes, go up indefinitely, although history shows that even deep corrections are eventually eclipsed by new gains. Yet some winning streaks are longer than others.
Write to Teresa Rivas at teresa.rivas@barrons.com
