The US stock market is on the cusp of making history. Specifically, the S&P 500 Index.
It’s on an epic winning streak, delivering positive total returns — including reinvested dividends — every single month so far in 2017.
As Craig Nicol and Jim Reid, strategists at Deutsche Bank point out, this is not only a rare occurrence, it’s on the cusp of being unprecedented.
“2017 has now seen every month this year experience a positive total return for the index,” the pair wrote in a note last week.
“This has only been equalled in 1995 where the first 9 months of the year also saw such an occurrence.
“Apart from 1995 and 2017, in the 90 years for which we have data we’ve not previously got beyond July before a negative total return month has arrived.”
So another positive return in October, which looks likely on current form with the index alone already up 1.24% a third of the way in, and it will be new record.
The chart below, supplied by Deutsche, tells the story.
Not only that, beyond looking at calendar year performance, the S&P 500 has now delivered positive returns in each of the past 11 months.
“In other words, the S&P monthly total return is all green since Trump won the election,” say Nicol and Reid.
“The longest winning stretch has been 12 months, which occurred during 1949-1950 and 1935-1936. So if October also sees a positive total return it will mark the joint longest such run in nearly 90 years of data.”
However, all good things must come to an end, and as Nicol and Reid note, when winning streaks of this length have occurred in the past, it’s often ended in an abrupt decline.
“As a word of warning, though, the S&P’s total return dipped 3.6% and 7.7% respectively in the subsequent month when these runs ended,” they say.
“This record run is coinciding with volatility back down towards the near record lows seen in the [Northern hemisphere] summer before the North Korean situation escalated.
“History suggest that these times are the exception rather than the norm so enjoy it while it lasts.”
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