The scorching-hot stock market is on pace to do something that's never been seen before

  • The S&P 500 has gone 382 days without a 5% pullback, a streak just over two weeks shy of the record.
  • US stocks have been aided throughout the almost nine-year bull market by a buy-the-dip mentality that has conditioned investors to add to exposure on weakness.

The stock market is on the brink of history.

Sure, the S&P 500 has made history on a seemingly weekly basis with its record highs, but this unprecedented feat is about longevity. The index has gone 382 days without a 5% pullback, putting it just over two weeks away from the longest streak on record, dating back to 1929, according to Goldman Sachs data.

That US stocks are at the precipice of such a prolonged stretch of strength speaks to the resilience of the ongoing bull market, which will turn nine years old in early March and is already the second-longest on record. At the core of the ongoing rally has been a “buy the dip” mentality, which involves adding to bullish positions whenever stocks drop.

1 4 18 spx drawdown record COTDGoldman SachsThe S&P 500 is on the brink of a record streak without a 5% sell-off.

The tactic has been crucial for the near-record streak as a healthy undercurrent of pessimism has led to minor pullbacks that bulls have then used to fatten their existing positions. In fact, it’s been so effective that investors are now embracing brief rough patches, Bank of America Merrill Lynch says.

“Investors no longer fear shocks but love them,” a group of strategists led by Nitin Saksena wrote in a recent client note. “Since 2013, central banks have stepped in – or communicated that they may step in – to protect markets, leaving investors confident enough to buy the dip.”

Of course, no rally can be considered legitimate without concrete reasons for traders to buy more stocks. In the case of the streak without a 5% dip, US equities have benefited greatly from six straight quarters of earnings growth, which followed a multiquarter profit recession.

Add that earnings expansion to a gradually improving economy and continued monetary accommodation from global central banks and you have a combination of factors ideal for supporting an unprecedented run of gains.

And that bullish outlook matches up with Wall Street expectations. According to the median 2018 price target, strategists expect the S&P 500 to climb 5.2% from current levels to 2,855 by year-end.

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