- Currently up 11% year to date, the benchmark S&P 500 saw a decline of more than 4% in April.
- The index was up around 7% as of Friday from its low points in April.
- When chip giant Nvidia releases its quarterly results on Wednesday, the market‘s momentum will be put to the test.
Thanks to indications of a slowing economy and a mild slowdown in the job markets, the U.S. stock market hit record highs this week. Currently up 11% year to date, the benchmark S&P 500 saw a decline of more than 4% in April. As stocks bounce back from comparable-sized declines, market strategists say they often gain steam and keep going up even after regaining territory.
Additional profits might be in store if the latest rally follows that pattern. Keith Lerner, co-chief investment officer of Truist Advisory Services, notes that during previous S&P 500 recoveries after 5% pullbacks, there has been a median gain of 17.4%. The index was up around 7% as of Friday from its low points in April.
Record-breaking surge
More upside for the current bull market is also suggested by broader historical comparisons. It has taken the S&P 500 about 50% of its gains since October 2022 to reach a 108% median ascent in bull markets since the 1950s.
The present bull market has been in place for slightly over 4.5 years, while the S&P 500 has gained roughly 50% since October 2022. Rekindled hope that the economy is headed for a soft landing and expectations for robust earnings are two things that investors believe will drive further advances in stocks.
When chip giant Nvidia releases its quarterly results on Wednesday, the market’s momentum will be put to the test. Investors will also be observing statistics on durable goods and consumer confidence the next week to see whether there are any other indications that growth is slowing down sufficiently to justify interest rate reductions this year.
The way that different market segments perform after a rally can also be influenced by momentum; in the past, S&P 500 sectors that led the way when stocks recovered from a decline beat the overall market 68% of the time as stocks kept rising.
With an average yearly return of 13.5% when at least nine of the S&P 500 sectors are above those trendlines, all 11 of the sectors are currently above their 200-day moving averages.
