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History Suggests Record 50-Day Stock Market Rally May Be Just The Beginning

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History Suggests Record 50-Day Stock Market Rally May Be Just The Beginning

The S&P 500 has gained a record 39.6% since it hit its 2020 low back on March 23. Not only has that rally erased much of the year’s COVID-19-related losses, it's also the best 50-day stretch in the history of the market.

After such a strong rally, traders are understandably getting uneasy the market is overbought and due for a pullback. However, from a purely historical perspective, the strongest 50-day periods have generally led to even more gains over the year that follows, according to LPL Financial Senior Market Strategist Ryan Detrick.

A Closer Look

On Thursday, Detrick looked at the seven other times since the S&P 500 was constructed in 1957 that the index has gained at least 20% over a 50-day period. In all seven instances, the index gained at least another 5.2% in the year that followed.

“Big 50-day rallies in the past have taken place near the start of new bull markets, and the returns going out a year were quite bullish,” Detrick wrote.

What’s Next?

LPL found that the S&P 500 averaged a 1.1% gain over the month following the best 50-day stretches. The S&P 500 has averaged a 6.2% gain over three months, a 9.1% gain over six months and a 19.4% gain over the year following these exceptional 50-day stretches.

Detrick said traders are right to be concerned about the durability of the rally in the near-term given potential red flags in the put-to-call ratios among option traders. However, history suggests the next six months to a year could be very kind to investors overall.

Benizinga’s Take

It’s difficult to step in and chase the SPDR S&P 500 ETF Trust (NYSE: SPY) today after the market has had its best 50 days in history. However, LPL’s research suggests long-term investors with dry powder should consider scooping up S&P 500 stocks on any near-term pullbacks.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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