To begin with, the S&P 500 finished up last quarter for the fifth quarter in a row. Ryan Detrick recently shared a chart showing future returns of the S&P 500 after a 5-quarter up streak ("win streak"):
This shows that after the S&P 500 goes up five quarters in a row, the index continues higher on average. The median return two quarters out is 6.2%, and the return is positive 81.8% of the time. Looking four quarters out, one can see the volatility that a long quarterly up streak can produce. Returns range from a high of 26.4% after 1954 to a low of -23.6% after 2007. However, on average, returns four quarter out are positive.
Next, JP Morgan released its Guide to the Markets chartbook, showing interesting trends for equities. See this chart depicting corporate profits in the S&P 500:
This helps explain the five quarter up streak discussed above. In the long run, earnings growth powers the stock market higher, and right now, earnings are expected to grow greatly the next three years as seen in the chart on the left. On the right, one can see that since January 2021, the S&P 500 is up 14.4%, which is composed of 19.7% of earnings growth a multiple compression of 5.3%. The conclusion is that the recent increases in the stock market are backed by strong earnings and the expectation of further earnings growth.
Lastly, Sentiment Trader posted an interesting stat about the latest new high in the Nasdaq Composite:
This stat is an example of how large cap tech stocks are leading the market. The Nasdaq Composite made a 52-week high while 69% of the stocks on the exchange did not go up. Most recently, Microsoft surpassed a $2 trillion market cap, while Facebook topped $1 trillion. Apple is currently the largest market cap company at $2.4 trillion. Amazon and Google are both nearing a $2 trillion market cap.
Have a great weekend!
Here is some good music to listen to:
According to Discogs, this is a product of Bowman Recording Company out of Hollywood, California. The album was released in 1978 on Baby Grand Records.