Best Start for Stocks Since 1987 Sets Up Market for a Yearly Win

(Bloomberg) -- With three days left in February, the S&P 500 has almost locked up a gain for the year, if history is any guide.

With a 3.7 percent gain this month, the benchmark for American equities is on track for back-to-back gains at the start of a year for just the 28th time since 1950. In all but two of the prior cases, the index rose over the next 10 months, with the advance averaging 14 percent, according to Ryan Detrick, senior market strategist at LPL Financial LLC.

U.S. stocks have surged 12 percent this year as the Federal Reserve softened its stance on tightening monetary policy and Congress reached a deal to avert a costly government shutdown. The strong start showed signs of faltering in recent weeks, as trade tensions persist and investors come to grips with a potential slump in corporate earnings.

Detrick’s data, presented Monday in a post on Twitter, may embolden bulls worried the runup has gone too far, too quickly. The S&P 500 is now 2.7 lower than the average year-end target among strategists surveyed by Bloomberg, and just 4 percent from its all-time high set in September.

Bears may also find reason for comfort in the data. The last time stocks started a year this strongly, in 1987, they tumbled 13 percent in the next 10 months -- with much of the pain coming on Black Monday. The other time stocks failed to rally after gains in the first two months was in 2011, when the U.S. sovereign credit rating was downgraded.

To contact the reporter on this story: Elena Popina in New York at epopina@bloomberg.net

To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Jeremy Herron, Dave Liedtka

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