As of June 6, the S&P 500 Index (^SPX) was a shade more than 2% away from its Feb. 19 all-time high. Closing above that prior record would complete the round-trip for the most recent 19% decline and mark the 25th correction (decline of 10% to 19.9%) since WWII, writes Sam Stovall, chief investment strategist at CFRA Research.
All sizes, styles, and nine of 11 sectors within the S&P 1,500 Index (consisting of the S&P 500, MidCap 400, and SmallCap 600) currently remain below their pre-correction levels. The industrials and utilities sectors have moved into positive territory, while the consumer discretionary, energy, and health care groups remain firmly in the red.
S&P 500 Index
Encouragingly, 34% of the S&P 1,500’s 155 sub-industries have already eclipsed their prior highs, with 16 of these groups up by double-digits. Leaders include heavy electrical equipment, multi-line insurance, and tobacco. Those most deeply in the red include diversified chemicals, home-furnishing retail, and managed health care.
When the S&P 500 finally does close above its Feb. 19 high, investors will wonder how much the market might continue to climb before tripping into a meaningful tumble once again. Using history as a guide, (for it’s never gospel), the S&P 500 rose an average of 10% over a 127-calendar-day period following the conclusion of all 24 prior corrections since WWII.
What’s more, since 1995, the S&P 500 gained an average of 10.5% in 10 post-correction periods, accompanied by advances for all sizes, styles, and sectors in the S&P 1,500, as well as 96% of its 103 sub-industries in existence for at least 20 years.
Meaningful, extended gains are not assured, however. Eleven of these prior 24 post-correction periods only enjoyed subsequent gains of no more than 5% over an average 36-day period – before slipping into a new selloff of 5% or more. A continued easing of inflation readings and still-favorable employment data should help extend the duration and magnitude of this advance.
