The strong stock market rallies continue despite the spreading of the Covid-19 delta variant, inflation concerns, and the Fed tapering fears.
S&P 500 Index and other market indexes have recorded one of the longest winning streaks since the 10-month bull run of 2017. At the end of last month, the benchmark index recorded seven straight winning months, with the only losing month during January 2021. SPX’s 20% gain this year has come without even a 5% correction. The broad equity benchmark more than doubled since the pandemic market low in March 2020.
On the sector front, ten of the eleven S&P sectors rose during August. All of the sectors are positive for the year. After seven straight months of gains, what could lie ahead for stocks in September and into the end of the year?
September remains the worst month of the year, with the S&P 500 Index declining 0.4% on average over the past twenty years. Regardless of September fears, the setup into the end of the year only gets better into the seasonal strength period. The average returns for the last three months of the year are 1.0% for October, 1.9% for November, and 0.7% for December.
Despite record highs this year below the surface, it is not as rosy. We have witnessed numerous rotational corrections within the S&P 500 sectors, investment styles, and asset classes. The rotations have kept the major indexes from overheating. Also, the bear declines in meme stocks, SPACs, and cryptos may have curtailed speculation from escalating into outright bubbles.
With the above thoughts in mind, here are the last five years of performances of major stock market indexes. If the seasonality trends repeat, can we expect the current bull rallies to sustain into the end of the year? And most importantly, will they approach the stellar performances of 2017, 2019, and 2020?