S&P 500’s Best Run Since 2018 Foreshadows More Gains If History Guide

(Bloomberg) -- Stock market bulls can claim to have history on their side as they seek validation in the face of risks from the Covid-19 delta strain and peaking earnings.

The S&P 500 rose for a sixth straight month in July -- the longest such streak since 2018 -- and the average return 12 months out after similar runs in the past half century was 8.3%, according to data compiled by Bloomberg.

“The extreme strength we’ve seen lately is another clue that this bull market is likely alive and well,” Ryan Detrick, chief market strategist at LPL Financial LLC, wrote in an email.

U.S. stocks remain in touching distance of records, buttressed by a tide of Federal Reserve stimulus and a retail investor base that swoops in to buy dips despite elevated valuations. While some turbulence is possible after the S&P 500’s near doubling since pandemic lows, bears agitating for a bigger reckoning have so far been proved wrong.

Over the past 50 years, the S&P 500 has climbed for six months in a row 35 times aside from the latest stretch. Three and six months later, average returns were just over 2% and almost 5.5% respectively, according to the data compiled by Bloomberg.

Deutsche Bank strategists recently warned of a possible pull back in the S&P 500 but also raised their year-end target for the index to 4,500 from 4,100. S&P 500 futures rose 0.5% as of 8 a.m. in New York, pointing to a bounce back from Friday’s swoon in stocks.

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